Bank of Canada Announcement July
With global trade tensions clouding its crystal ball, the Bank of Canada decided to stand pat in its recent interest rate announcement--maintaining its target for the overnight rate at 1 3/4 percent.
While the Bank already anticipated that trade tensions would have a negative impact on the global economy, it’s been forced to further adjust its forecast in light of weaker sentiment and activity in major economies. Global manufacturing activity, business investment and commodity prices, in particular, are all being negatively impacted by the trade conflict between the United States and China. That said, central banks in the US and Europe have indicated that they're ready to adjust their monetary policies and stimulus strategies appropriately, which has helped ease global financial conditions. For this reason, the Bank now expects global GDP to grow by 3 percent in 2019 and to strengthen to around 3 1/4 percent in 2020 and 2021.
From a Canadian economic perspective, things seem to be turning the corner. After a weak late 2018 and early 2019, growth is now stronger than predicted and consumption is being supported by a healthy labour market. At the same time, housing is stabilizing and exports are rebounding. That said, trade conflicts and competitiveness challenges indicate trade and investment won't be riding high for long. The Bank projects real GDP growth to average 1.3 percent in 2019 and about 2 percent in 2020 and 2021.
With both core and CPI inflation sitting around the 2 percent target, and trade tensions making it difficult to predict the future, the Bank has decided to stay the course when it comes to monetary policy. It will continue to monitor incoming data--and pay particular attention to developments in the energy sector and global trade conflicts--before making further decisions.
If you're a variable rate mortgage holder, this is good news--as it means your payment will stay where it is for now. If you're thinking about renewing or obtaining a new mortgage, and are unsure whether a variable or fixed makes the most sense right now, feel free to give me a call. I'd be happy to discuss your personal situation and find the mortgage product that's best for you.