The Bank of Canada announced Wednesday morning it will maintain its target for the overnight rate at 0.5%.
“The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent,” the bank writes in a release. “The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.”
According to the Bank of Canada, its economic stimulation efforts are “working their way through the Canadian economy.”
“Inflation has evolved in line with the outlook in the Bank’s July Monetary Policy Report (MPR). Total CPI inflation remains near the bottom of the target range, reflecting year-over-year price declines for consumer energy products,” the bank writes. “Core inflation has been close to 2 per cent, with disinflationary pressures from economic slack being offset by transitory effects of the past depreciation of the Canadian dollar and some sector-specific factors.”
The global economy – especially in China – continues to be a concern for the central bank.
“This has contributed to heightened financial market volatility and lower commodity prices,” the bank writes. “Movements in the Canadian dollar are helping to absorb some of the impact of lower commodity prices and are facilitating the adjustments taking place in Canada’s economy.”
This latest rate decision aligns with a number of economist predictions.
40 leading economists suggested there would be no change to the rate today, according to BNN. Analysts forecast the chance of a hike at 55%, but not until 2017.
Many analysts are predicting an eventual rate hike in the next year-and-a-half, but one mortgage broker who closely follows the market believes the rate will be cut once more before that.
“I think there will be a rate cut in the next six months; I don’t see the economy improving enough in that time to warrant a hike,” Dustan Woodhouse, a Vancouver-based broker with Dominion Lending Centres, said. “The precedent has already been set for a ¼ point drop and I think it will go down before it goes up.”