Bank of Canada Announcement
The Bank of Canada has decided to hold on to lower overnight rates of 0.25% with a bank rate of 0.50% and a deposit rate of 0.25%. The Bank maintains exceptional forward guidance on the path of the overnight rate, reinforced and supplemented by the Bank's quantitative easing (QE) program. These rates come as good news for people looking to purchase a home with little to no change from prior rates announcement.
Here is a summary of the main points of the announcement:
1) The Canadian Economy outlook has greatly improved. Movement within the economy has been resilient. This has been made possible because of vaccine rollouts.
2) Economic growth has succeeded prior forecasts made in the January Policy Report. Current bank projections see a promising growth of 6.75% this year within the GDP. The Canadian dollar has been strengthened by the rising prices of oil.
3) Employment has greatly improved because of February and March Job gains. But new lockdown regulations threaten the labour market and make it difficult for low-wage workers, young people, and women to foot the market.
4) The desire for more living space, low mortgage rates, and limited supply has been the driving factor for the rise of residential construction and historically high resale. The Bank will continue to monitor the potential risks associated with the rapid rise in house prices.
5) Strong growth in foreign demand and higher commodity prices are expected to drive a robust recovery in exports and business investment. Additional federal and provincial fiscal stimulus will contribute importantly to growth.
6) Over the next few months, inflation is expected to rise temporarily to around the top of the 1-3 percent inflation-control range. This is largely the result of base-year effects—year-over-year CPI inflation is higher because prices of some goods and services fell sharply at the start of the pandemic.
7) The increase in oil prices since December has driven gasoline prices above their pre-pandemic levels. The Bank expects CPI inflation to ease back toward 2 percent over the second half of 2021 as these base-year effects diminish, and inflation is expected to ease further because of the ongoing drag from excess capacity
The bank has committed to holding policy interest rates at their lower projections to make up the 2% slack within inflation targets. The pandemic will continue to be the main contributing factor, of future Canadian economic forecasts. Until then, the Governing Council’s ongoing assessment of the strength and durability of recovery will be the key to our bonce back. Full recovery is not expected until mid-2022.