On September 8th, the Bank of Canada made its 6th interest rate decision of the year – and once again they have left the overnight rate unchanged at 0.25%. This is not surprising given that proximity of the Federal elections.
This low rate has been in effect since March 2020.
Here is a summary of the Bank’s press release:
The global economic recovery continued through the second quarter.
But supply chain disruptions are restraining activity in some sectors
Rising cases of COVID-19 in many regions pose a risk to the strength of the global recovery
In Canada, GDP shrunk by about 1 percent in the second quarter, weaker than anticipated by the Bank in July.
Exports also declined partly due to supply chain problems, especially in the auto sector
Housing market activity pulled back from recent high levels
Housing market activity fell back from recent high levels
Consumer spending, business investment and government spending all contributed to growth.
Employment rebounded through June and July, as restrictions lifted.
Considerable slack in the labour market still remains. In particular, low-wage workers are being affected.
The Bank expects the economy to strengthen in the second half of 2021. But, the fourth wave of COVID-19 infections as well as ongoing supply-chain problems could impact recovery.
Inflation remains above 3%, due to gasoline prices and pandemic-related supply bottlenecks. The Bank expects these effects to be temporary. For how long and to what extent they will continue to drive up inflation in unknown.
The Bank has renewed their commitment to keeping interest rates low until a 2% inflation rate can be sustainable achieved.
The Bank forecasts this to happen end of 2022, but they will continue to track the economic recovery.
WHAT DOES THIS MEAN FOR MORTGAGE RATES?
We should continue to enjoy low interest rates for at least the next year. Rates may continue to be low if supply chain issues, labour shortages and other factors continue to boost up inflation.