The Bank of Canada (BOC) announced today (March 8th, 2012) that the overnight lending rate will remain unchanged for the 12th consecutive time over the last 18 months. The last time the BOC made a change to the overnight lending rate was back in September of 2010 with an increase of 25 basis points.
The overnight rate currently lingers at 1 per cent. The bank rate is at 1.25 per cent and the prime lending rate also remains at 3 per cent.
What the Experts are Saying
C.D. Howe Institute’s Monetary Policy Council (MPC) met earlier this week to discuss their ideas around a possible rate change and all 9 members had anticipated that there would be no change. This is consistent with the message coming from the RateSupermarket.ca Mortgage Rate Outlook Panel members. Interestingly enough, all members of the C.D. Howe are also forecasting no changes for the BOC’s meeting next month on the 17th of April.
The 6 and 12 month opinions are mixed due to clashing philosophies as to where the state of the global and domestic economies will be as well as concerns about maintaining a domestic inflation rate around the target of 2 per cent; however the majority currently anticipate no adjustments will be made to the overnight rate over the next year.
The problem with raising rates too soon is the negative impact that it would have on the Canadian dollar and net exports, could our trading partners afford this increase? Everyone hopes the worst is over in the United States since they have been reporting some healthier numbers, however policy changes are going to continue to happen throughout 2013 and no one is holding their breath. There have also been signs of slowing growth in China, India, Brazil and Russia; now it’s the BOC’s turn to make a move and they’ve decided to hold steady.
It will be interesting to see how Canada maintains the moderate growth that it has been experiencing vs. how the rest of the world is keeping up.