The Bank of Canada announced this morning that it is maintaining its target for the key overnight lending rate at 3 per cent. This typically correlates to Canada’s major banks keeping their prime lending rate stable, and currently at 4.75%. Good news for Canadian mortgage borrowers on variable rate mortgages or HELOC’s.
The bank of Canada cites three main factors in their decision to keep the overnight lending rate stable:
- Weakness in the US economy, expected to continue;
- Ongoing unpredictability in international financial markets; and
- Significant increases in many commodity prices.
Global financial markets and US economics are in line with analysts predictions in the April Monetary Policy Report, while commodity prices are outpacing many expectations.
According to the Bank of Canada press release from July 15, 2008:
“Although Canadian economic growth in the first quarter was weaker than expected, final domestic demand continues to expand at a solid pace. The economy is judged to have moved into slight excess supply in the second quarter of this year; excess supply is expected to increase over the balance of the year. High terms of trade, accommodating monetary policy, and a gradual recovery in the U.S. economy are expected to generate above-potential growth starting early next year, bringing the economy back to full capacity around mid-2010. Canadian GDP is projected to grow by 1.0 per cent in 2008, 2.3 per cent in 2009, and 3.3 per cent in 2010.”
The next key interest rate announcement will be on September 3, 2008.
