Bank of Canada Rate Remains 0.50%
CBJ — With the federal budget now just 13 days away, Bank of Canada Governor Stephen Poloz has opted to keep the bank’s bench-setting interest rate at 0.50%
It appears the Bank will wait and see what Ottawa and finance minister Bill Morneau plans to spend on stimulating the economy in its forthcoming federal budget before taking any further action. A rate cut next month to 0.25% remains a distinct possibility, given the lagging economy. That said, exports are slowly rebounding, fear of a global recession is fading and the battered price of oil is on the upswing. Morneau is expected to inject a hefty dose of fiscal stimulus to help revive the sluggish economy in its March 22 budget, but Poloz is wisely waiting to see it actually unveiled before taking any further action at the Bank.
The central bank has kept its overnight interest rate unchanged since last July.
Regions of Western Canada are in recession, which has set off tumbling real estate prices, rising bankruptcies and an outflow of workers drawn to Alberta’s once-booming economy. The housing market remains red-hot in Vancouver and Toronto, creating fears about affordability and an eventual price collapse.
In January, the bank forecast growth of 1.5 per cent this year in Canada and 2.5% next year. The bank’s next forecast is due out April 13, which will include an assessment of the impact of Ottawa’s stimulus plan.