Everyone eagerly waited to see what the Bank of Canada would do with the interest rate yesterday, as many homeowners sat waiting to see if now would be a good time to refinance their mortgage. It was expected that the overnight rate would remain at 1%, the same rate it’s been since September of 2010 – the longest time in history (or at least recent history,) it’s remained that low. The anticipation wasn’t for nothing. The BoC made their announcement, and homeowners walked away happy, and on their way to call their Toronto mortgage broker.
The Monetary Policy Report from the Bank of Canada stated that, “On 17 January, the Bank maintained the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.”
Those that were hoping to hear the Bank singing a different tune were sorely disappointed (although we didn’t find too many unhappy faces in our crowd.) The Bank gave all the usual reasons for keeping the rate the same, most of them having to do with the global economy and the fact that it has not yet completely rebound from the recession. That’s the case in the United States, where although “the rebound in real GDP during the second half of 2011 was stronger than anticipated, the Bank expects the recovery will proceed at a more modest pace going forward.”
While that may not sound so good for our neighbours down south, it’s better than the European economy. The report also said that, “the sovereign debt crisis in Europe has intensified, conditions in international financial markets have tightened and risk aversion has risen. The recession in Europe is now expected to be deeper and longer than the Bank anticipated.”
So when, if ever, will rates rise again? Well, the announcement means that we all get to keep guessing that for a little while longer. While it’s expected that the Bank will keep the rate the same until the beginning of next year, the next meeting and following announcement will be on March 8, 2012.
