This morning, the announcement of the Bank of Canada surprised no one: the funding rate is maintained at 1% for six more weeks. The economists were right and the final verdict is in line with their predictions. Since there is no contradiction that is shaking up the real estate market; interest rates remain low.
In November, the Canadian inflation rate rose by 0.9%
We had already visited the 7th month of the period of 13 months has passed and inflation still do not exceed the scale suggested by the bank, or between 1% and 3%. Since the target of 2% issued by the Central Bank has not been reached; the Bank of Canada maintained its low interest rate. In today’s press release, the message regarding the economy’s inflation rate was clear:
“Inflation in Canada is well below the 2% target, largely due to an economic surplus (in terms of supply) and increased competition in the distribution sector.
Inflation is expected to be much lower than expected for most of the coming period
The Bank of Canada now expects inflation to reach its 2% target “within 2 years”. As for the growth of the Canadian economy, the Bank of Canada has been optimistic since the second half of 2013. Governor Gideon now expects strong demand from the United States, together with the depreciation, which took place this week, the Canadian dollar, should boost exports.
Finally, the highlight of the day remains the Bank of Canada’s thoughts on inflation
“Although the fundamentals of economic growth and future growth seem to have strengthened; inflation is expected to remain well below target for some time to come. As a result, the risks of deterioration relative to inflation have gained importance. Taking into account these considerations, the Bank of Canada estimates that the balance of the various risks, is part of the area articulated last October, and decided to extend the rate of the day to 1%.
But maybe the most important phrase in the whole press release is this: “The timing and direction of future rate policy changes will depend on how new information influences the balance of risk.”