The interest rate announcement earlier today confirmed what many were expecting, the Bank of Canada will maintain the key overnight lending rate. The overnight rate continues to sit at 1 per cent, the Bank Rate is 1 1/4 per cent and the deposit rate is 3/4 per cent.
This announcement mirrors the thoughts of our Mortgage Rate Outlook Panel and means that variable mortgage rates will remain unchanged. The overnight rate is linked to the Prime Rate (currently sitting at 3 per cent), the main indicator for variable mortgage rates.
“Despite the significant challenges that weigh on the global outlook, global financial conditions remain very stimulative and investors have become noticeably less risk averse.”, says The Bank of Canada in a press release.
The Canadian economy continues to thrive. A strong Canadian dollar is putting downward pressure on inflation, keeping it in check. Business investment and net exports are up.
Overall, the Bank is projecting growth of 2.9 per cent in 2011 and 2.6 per cent in 2012. The economy is likely to return to capacity in the middle of 2012, two quarters earlier than initially projected in the January Monetary Policy Report.
Interest rates are expected to increase gradually throughout 2011, which would cause variable mortgage rates to rise, but the first move isn’t expected until July 2011.