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Table of contents
Summary
The Bank of Canada kept the overnight rate steady at 5% and the deposit rate at 5%, persisting with its policy of quantitative tightening. The decision may impact homeowners, buyers, and sellers across Canada. The Canadian economy expanded more than expected in Q4, potentially impacting mortgage rates. The Bank will reveal the next overnight rate target on April 10, 2024, which will be closely scrutinized by economists, investors, and policymakers.
Bank of Canada Keeps Overnight Rate Steady
March 6, 2024: The Bank of Canada announced today its decision to keep the overnight rate at 5%, the Bank Rate at 5¼%, and the deposit rate at 5%. The Bank is persisting with its policy of quantitative tightening. This decision can impact homeowners, buyers, and sellers across Canada in various ways.
What Happened in the Global Economy and the Impact on Homeowners, Buyers, and Sellers
Global economic growth slowed in Q4, with US GDP growth also slowing but remaining impressively strong, thanks to solid contributions from consumption and exports. However, Canada’s economy expanded more than expected in Q4, albeit weakly.
This means that the cost of borrowing will remain steady for homeowners, buyers, and sellers, potentially impacting mortgage rates. This could be particularly relevant for those looking to refinance or secure a new mortgage.
Canadian Economy in Q4 vs Q3 2023
The Canadian economy saw a 1% expansion in real GDP after a 0.5% decrease in Q3. Consumption modestly increased by 1%, while final domestic demand decreased due to a significant fall in business investment. However, a robust increase in exports pushed growth forward.
Inflation Rates and Their Effect on the Real Estate Market
The inflation rate, a key factor affecting homeowners and property buyers, eased to 2.9% in January. Shelter price inflation, a critical component for those in the real estate market, remains high, contributing significantly to overall inflation. However, the Bank expects inflation to remain near 3% in the first half of the year before gradually decreasing.
The Governing Council keeps a keen eye on the inflation outlook, significantly the persistence of underlying inflation. They wish to witness further and sustained easing in core inflation and continue to monitor economic indicators such as demand and supply, inflation expectations, wage growth, and corporate pricing behaviour. The Bank emphasizes its commitment to restoring price stability for Canadians, a vital aspect for those buying, selling, or owning a home.
Upcoming Announcement by the Bank of Canada
Please mark your calendars because the Bank has announced that it will reveal the next overnight rate target on April 10, 2024. In addition, the Bank will publish its complete outlook for the economy and inflation, along with any associated risks. Canadians highly anticipate this announcement because the overnight rate target significantly impacts the country’s economy.
The Bank’s outlook for the economy and inflation will be closely scrutinized by economists, investors, and policymakers as it will provide insights into the Bank’s assessment of the current economic conditions and its expectations for the future. The Bank’s assessment of the risks associated with its outlook will also be crucial in guiding the monetary policy decisions in the coming months.
Overall, this announcement by the Bank is essential for all those interested in the country’s economic developments and monetary policy decisions. It will be interesting to see how the market reacts to this announcement and how it will affect the country’s overall economic growth.
FAQ
Q: What did the Bank of Canada announce on March 6, 2024?
A: The Bank of Canada announced that it has decided to keep the overnight rate at 5%, the Bank Rate at 5¼%, and the deposit rate at 5%. The Bank is also proceeding with its policy of quantitative tightening.
Q: What was the global economic growth rate in Q4?
A: The global economic growth slowed in Q4, with US GDP growth also slowing but remaining impressively strong due to solid contributions from consumption and exports.
Q: How could this decision impact homeowners, buyers, and sellers?
A: The decision means that the cost of borrowing will remain steady, which can impact mortgage rates. This could be particularly important for those looking to refinance or secure a new mortgage.
Q: How did the Canadian economy perform in the previous quarters?
A: The Canadian economy’s real GDP expanded by 1% after decreasing by 0.5% in Q3.
Q: What is the inflation rate likely to be for the first half of the year?
A: The Bank expects the inflation rate to remain near 3% in the first half of the year before gradually decreasing.
Q: When is the next overnight rate target due to be announced?
A: The Bank is set to announce the next overnight rate target on April 10, 2024.
Q: What is the outlook for the economy and inflation?
A: The Bank will publish its complete outlook for the economy and inflation, including associated risks, at the subsequent announcement of the overnight rate target.
