“Core inflation has softened by more than the Bank had expected…”
“…global tail risks have diminished.”
“Caution about high debt levels has begun to restrain household spending.”
“…exports should remain below their pre-recession peak until the second half of 2014…”
“…Some modest withdrawal of monetary policy stimulus will likely be required over time…”
The benchmark 5-year bond, which is closely correlated with fixed mortgage rates, fell 5 bps to 1.41% on the Bank’s decision.
Economists will now likely revise their rate hike calls (which have proven hopelessly non-predictive) to late 2013 or early 2014.
The next Bank of Canada Rate meeting is six weeks away on March 6.
One interesting side note: The Bank added that household debt growth has eased to just 3%. That’s the weakest annualized rate since 1999 and it reflects “a slowdown in the growth of both residential mortgage
and consumer credit.”
Canadians are both voluntarily heeding government debt warnings and being forced to heed them through stricter lending rules.