The Bank of Canada announced this morning that it is
maintaining its overnight rate at 0.5 per cent. In the press release
accompanying the decision, the Bank cited that inflation and economic growth
were evolving roughly in-line with expectations, though household vulnerability
to economic shocks has moved higher due to high debt burdens.
The Canadian economy got off to a very strong start and
will likely end up recording real GDP growth above 3 per cent for the first
quarter of the year. However, much of that growth was front loaded and more
recent data has been weaker. Growth is expected to slow sharply in the second
quarter as a result of the wildfires in Alberta and their impact on oil
production before rebounding in the third quarter and ramping up to end the
year. Slower growth through the summer months will keep the Bank on the sidelines
though a probable tightening of monetary policy by the US Federal Reserve as
early as June may add some upward pressure to Canadian long-term interest
rates.
Copyright BCREA – reprinted with permission
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