Bank of Canada Announcement June 09: Key Takeaways

On June 9, the Bank of Canada (BoC) announced that it will hold its current level of policy rate until the inflation objective is sustainably achieved. The overnight rate remains the same at the effective lower bound of 0.25%. The Bank rate stays at 0.5% and the deposit rate at 0.25%.

Economic Outlook

1. 1. Global economic activity is picking up due to the falling COVID-19 cases and vaccine coverage rising
   2. Commodity prices have risen, notably oil
   3. Canadian dollar has appreciated
   4. First quarter GDP growth came in at a robust 5.6 per cent, which is lower than predicted, however, shows rising confidence and resilience
   5. Lockdowns in the third wave dampened economic activity in the second quarter
   6. Low wage worked, youth, and women continue to bear the brunt of job losses

What to Expect

• The Canadian economy is expected to rebound strongly due to vaccinations and the easement of provincial lockdowns
• Housing market activity expected to moderate but continue to be elevated
• Strong growth in foreign demand and higher commodity prices should increase exports and business investment

Despite the positive outlook based on the vaccine rollouts, the risks of inflation continue to be eminent. As predicted in the April Monetary Policy Report (MPR), CPI inflation has increased to the top of the 1-3 percent inflation-control range. This is largely due to the base-year effects and much stronger gasoline prices. Additionally, the core measures of inflation have also risen due to temporary factors and base year effects -- but less than the CPI inflation. As base-year effects diminish and excess capacity exerts downward pressure, CPI inflation is expected to ease later in the year.

According to Governing Council judges, the Canadian economy continues to hold considerable excess capacity which will require monetary policy support to recover. The BoC are committed to holding the policy interest rate until the 2 percent inflation target is sustainably achieved. According to the April MPR, this is likely to occur in the second half of 2022. In the meantime, the bank will continue to provide monetary policy stimulus to support the recovery and attain the inflation objective

Ontarians can take advantage of the low interest rates whether it is to buy a home, purchase an investment property or refinance and use the equity on their home to expand their business, invest or consolidate debt.

If you are interested in knowing your purchasing and refinancing options, take advantage of a free consultation session with one of our experts.