Bank of Canada Announcement Sept 2018
While CPI inflation is on the high side (sitting at 3%, a point above the Bank’s target of 2%), the Bank of Canada decided to maintain the target for its overnight rate at 1.5% in its September announcement. The reason? It believes the high CPI rate is temporary—brought on by a jump in the airfare component of the consumer price index—and should be back down to around 2% by early 2019. In addition, the Bank’s core measures of inflation are still sitting around 2%.
That being said, there are signs inflation could increase in the not-too-distant future—forcing the Bank to raise rates to keep them in check. The Canadian economy is humming along—in line with the Bank’s forecast—and the US economy is particularly robust, thanks to strong consumer spending and business investment. On the flip side, the Bank says global trade tensions are a significant risk to the global outlook.
While the Bank is paying close attention to NAFTA and other trade negotiations, and their potential impact on inflation, it admits gradual interest rate hikes will likely be warranted in the near future. If you’re concerned about how higher interest rates might affect your household, feel free to reach out.
I’m always available to chat—and offer my professional advice.