Bank of Canada Leaves Rates @ 1%

March 08, 2012

Canada’s Key Rate Stays At 1.00%

Once 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.