The Bank of Canada maintained its interest rate levels at 1.25% this week, in the face of slower growth in Canada’s economy. In the Bank of Canada’s Press Release April 18, 2017, the Bank advised that “In Canada, GDP growth in the first quarter was weaker than the Bank had expected“. A number of factors are involved. However the Bank concluded that “Slower economic growth in the first quarter primarily reflects weakness in two areas. Housing markets responded to new mortgage guidelines and other policy measures by pulling forward transactions to late 2017. Exports also faltered, partly owing to transportation bottlenecks. Some of the weakness in housing and exports is expected to be unwound as 2018 progresses.”
Spring 2017 has certainly been slow to arrive here in Canada from a weather perspective. The same can be said for the typical frenzied home buying market often experienced early in the year. Will the economy rebound in Q2 and beyond? Uncertainties with respect to NAFTA negotiations and the outlook for inflation weigh heavily. We are over 2% inflation for the first time since 2012. Can rate hikes be expected by year’s end? The Bank concludes that while its wait and see for now, the “Governing Council’s view that higher interest rates will be warranted over time.”
Read the entire Bank of Canada Press Release here.