Canada’s Key Rate Stays At 1.00%

Bank-of-Canada-Benchmark-RateOnce again, the Bank of Canada left the country’s key interest rate unchanged today at 1.00%. That’s where it has stood since September 2010.

In turn, prime rate should remain at 3.00%, making today’s BoC meeting mostly inconsequential for variable-rate mortgage holders in the near-term.

Economists were looking to the Bank’s official statement for changes in its tone. Here’s what it said:

  • There have been “tentative signs of stabilisation in European…sovereign debt markets”
  • “…The outlook for the Canadian economy is marginally improved from the January monetary policy report”
  • “Canadian household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest domestic risk.”
  • “U.S. activity” is “stronger-than-anticipated”
  • “The profile for core and total CPI inflation is somewhat firmer than previously anticipated”

In short, today’s BoC report seemed slightly more optimistic than the Bank’s recent announcements.

5-year bond yields (which lead fixed mortgage rates) responded by ticking a few basis points higher on the news.

The street consensus currently suggests that prime rate will resume higher in the second quarter of 2013, according to a recent Reuters poll.

The next BoC meeting is Tuesday April 17.

Rob McLister, CMT

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