OTTAWA: If you’re about to renew or take out a mortgage, you might want to take note of the fact that the Bank of Canada (BOC) recently announced that it’s hiking interest rates again. The financial institution is raising its target for the overnight rate to one per cent (up from .75 per cent). The BOC says The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent. What’s prompted this decision? A strong economy and a strengthening Canadian dollar.
The BOC says that recent economic data have been stronger than expected, “supporting the Bank’s view that growth in Canada is becoming more broadly-based and self-sustaining.” It appears that consumers spending rather than hoarding (a true sign that recession-prompted frugalness is seeping away) and that Canadians are enjoying gainful employment and income growth. The BOC also says there has been more widespread strength in business investment and in exports.
As for housing, it appears the formerly hot-hot-hot market has cooled due to some government intervention (namely the proposed foreign buyers and speculators tax). “The Bank continues to expect a moderation in the pace of economic growth in the second half of 2017, for the reasons described in the July Monetary Policy Report (MPR), but the level of GDP is now higher than the Bank had expected,” the report reads. “Given the stronger-than-expected economic performance, Governing Council judges that today’s removal of some of the considerable monetary policy stimulus in place is warranted. Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation.”
The BOC added that, going forward, “particular focus” will be given to the evolution of the economy’s potential and labour market conditions. The bank will also look at household indebtedness, a key consideration when it comes to elevating interest rates (as Canadians are quite in debt, especially regarding housing). The next scheduled date for announcing the overnight rate target is October 25, 2017.