The Bank of Canada said today that it will leave its key interest rate unchanged. In its statement this morning the Bank pointed to risks to a rebound in Canadian exports based on “a combination of disappointing productivity performance and persistent strength in the Canadian dollar.”
The Bank stated that keeping its key rate steady “leaves considerable money stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada,” and that any further increases “would need to be carefully considered.”
Earlier this year, the Bank had raised its key interest rate three times since June, but it also kept borrowing costs steady on October 19, noting some uncertainties in the economic outlook and continuing weakness in the U.S. economy.
Today’s Bank of Canada announcement means that Canadian lenders are expected to keep their prime lending rate steady. Products typically linked to a lender’s prime rate include variable-rate mortgages, variable-rate credit cards, and home equity lines of credit. The pricing of fixed-rate mortgages, on the other hand, is more affected by trends in the bond markets.
In the U.S. Ben Bernanke is investing $600 million in government bonds that he believes will provide an injection directly into the U.S. economy. Correct or not, this indicates to me that the U.S. prime rates are unlikely to move anywhere in the near future.
Rick Moran, AMP, OMB # M08001997
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