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After cutting the overnight interest rate two times this year, Canada’s central bank announced today that the rate was staying put — at least for now.

“The stimulative effects of previous monetary policy actions are working their way through the Canadian economy,” the Bank of Canada said in a news release.

In a surprise move in January, the Bank of Canada cut the key interest rate by 25 basis points to 0.75 per cent. It then followed this up with another 25 basis point reduction in July, bringing the rate down to 0.5 per cent where it now remains.

The next Bank of Canada interest rate announcement is set for October 21st, followed by another on December 2nd.

The big banks react

In a TD Economics report released today, TD Bank said the central bank’s move “was not surprising.”

However, given the uncertain outlook for the Chinese economy, which has sent shockwaves through stock markets the world over, and low commodity prices, TD thinks the rate could still go lower in the future.

“While our expectation is for rates to remain on hold, we cannot rule out the possibility of another rate cut should the external environment deteriorate meaningfully,” TD Bank said in the report.

RBC, on the other hand, has forecasted that the Bank of Canada won’t be compelled to move the overnight rate down any further.

“On net, our forecast implies that any residual downside risk to the inflation outlook will gradually dissipate and with it any need for the Bank to lower the policy rate further,” RBC said in its report.

With a strong labour market behind them, RBC expects that consumers will continue to make the most of the low interest rates to finance their purchases.

BMO’s outlook was similar. “We suspect that the Bank is on hold for the foreseeable future,” the bank concluded in its reaction to today’s announcement.

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