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Today, the Bank of Canada announced that rates would remain unchanged at one per cent, as they expect economic growth to moderate.
Employment growth has been very strong and wages have shown some improvement, supporting robust consumer spending in the third quarter which is positive but not enough to drive rates higher. [Global News]
The Bank of Canada sets its key interest rate eight times a year, which is used by banks to set their prime rates. The prime rate establishes how much it costs for you to borrow money on any type of loan (mortgage, car etc.).
Even though the Bank did not change rates this announcement, they did reference the fact that higher interest rates will be required over time, with wage growth and inflation driving that decision. This means things will remain the same, but look for a rate increase possibly in March 2018.
“While higher interest rates will likely be required over time, [the bank] will continue to be cautious, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.” [Bank of Canada]
What this announcement means is that our economy is moving towards more sustainable growth. GDP growth is expected to remain above potential, job growth is strong, wages are improving, spending is robust and growth is up in exports as well.
So things are status quo for now as the economy improves, we will expect a change in the spring of next year. If you have any questions about rates or this update, please feel free to contact me.