BoC interest rate revealed!
The Central Bank raised its new target for the overnight rate to % Wednesday, citing a confident financial outlook and above-potential growth.
This despite softened inflation, which thebankCanadas economy has been robust, fuelled by household spending. As a result, a significant amount of economic slack has been absorbed. The very
The BoC estimates real GDP growth to moderate from 2.8% in 2017 to 2% in 2018 and 1.6% in 2019.
Governing Council judges that the current outlook warrants todays withdrawal of some of the monetary policy stimulus in the economy, the Bank said. Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the Banks inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities.
judges to be temporary.strong
of the first quarter is expected to moderate over the balance of the year, but remain above potential, it said. Growth is broadening across industries and regions and therefore becoming more sustainable. As the adjustment to lower oil prices is largely complete, both the goods and services sectors are expanding.
Household spending will likely remain solid in the months ahead, supported by rising employment and wages, but its pace is expected to slow over the projection horizon, the Bank continued. At the same time, exports should make an increasing contribution to GDP growth. Business investment should also add to growth, a view supported by the most recent Business Outlook Survey.
The Bank also cited strengthening global economy and a US economy that is solidly growing as factors for raising its rate.
Europe is also experiencing above-potential growth.
However, geopolitical uncertainty and softened world oil prices remain concerns.
If you have any questions about how this can impact your variable rate mortgage or line of credit, contact me!
Bank of Canada maintains overnight rate target at 1 ¾ per cent
The Bank of Canada today maintained its target for the overnight rate at 1 per cent.
The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 per cent. The global economic expansion continues to moderate, with growth forecast to slow to 3.4 per cent in 2019 from 3.7 per cent in 2018. In particular, growth in the United States remains solid but is expected to slow to a more sustainable pace through 2019. However, there are increasing signs that the US-China trade conflict is weighing on global demand and commodity prices.
Global benchmark prices for oil have been about 25 per cent lower than assumed in the October Monetary Policy Report (MPR). The lower prices primarily reflect sustained increases in US oil supply and, more recently, increased worries about global demand. These worries among market participants have also been reflected in bond and equity markets.
The drop in global oil prices has a material impact on the Canadian outlook, resulting in lower terms of trade and national income. As well, transportation constraints and rising production have combined to push up oil inventories in the west and exert even more downward pressure on Canadian benchmark prices. While price differentials have narrowed in recent weeks following announced mandatory production cuts in Alberta, investment in Canadas oil sector is projected to weaken further.
Largest portions of household budgets go to shelter and transportation
Shelter remained the largest budget item for households in 2017, at 29.2% of their total consumption of goods and services. Spending on transportation, the second-largest expenditure category, accounted for 19.9% of total consumption, followed by food expenditures at 13.4%.
Households spent an average of $18,637 on shelter, up 3.4% from 2016. Included in this total was an average of $16,846 paid for principal residence (which includes rent, mortgage payments, repairs and maintenance costs, property taxes and utilities) and an average of $1,791 for other accommodation, such as hotels and owned secondary residences.
In 2017, two out of every three Canadian households owned their home, and more than half of homeowners had a mortgage. Homeowners with a mortgage spent an average of $25,904 on their principal residence, compared with $9,642 for homeowners without a mortgage and $13,499 for renters.
Canadian households paid $12,707 for transportation in 2017, up 6.7% from 2016. They spent an average of $11,433 on private transportation, which includes the purchase of cars, trucks and vans, as well as their operating costs. Households, on average, spent $2,142 on gasoline and other fuels in 2017, up 9.8% from 2016, reflecting the 11.8% annual average increase in gasoline prices. Spending on public transportation, which covers public transit, taxis, intercity buses, trains and air fares, remained relatively unchanged at $1,274.
In 2017, 84.0% of households owned or leased a vehicle. Vehicle ownership was highest in rural areas (94.9%) and lowest in cities with a population of at least one million residents (79.0%).