The Bank of Canada kept Canada’s key lending rate at the same place it’s been for a year: 1.00%.

As a result, variable-rate mortgage holders can expect prime rate to also stay put at 3.00%.

The BoC said this about its decision:

• “In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished.”
• “Core inflation is expected to remain well-contained…”
• “Largely due to temporary factors, Canadian economic growth stalled in the second quarter.”
• “The Bank continues to expect that (domestic) growth will resume in the second half of this year…”
• “…U.S. growth will be weaker than previously anticipated.”
• “Growth in emerging-market economies has been robust…”

The main takeaway here is that the BoC is no longer talking tough about rate increases, as it has recently. That supports the market’s thesis that rates will remain lower for longer.

As always, the Bank of Canada’s overriding goal is to keep inflation near 2% “over the medium term.”

Its next interest rate meeting is October 25. The financial markets expect no rate increase then either. In fact, traders are currently pricing in a 20% probability that the Bank of Canada will cut rates at this meeting (that number is highly volatile and may change by the time you read this).

The benchmark 5-year bond (which leads 5-year fixed mortgage rates) is trading at 1.435%, up 4 basis points on today’s news. It sits just over 13 bps above its all-time low of 1.302%.

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Rob McLister, CMT