homewithsarah.ca-BANK OF CANADA MAINTAINS OVERNIGHT RATE TARGET AT 1/4 PERCENT

Monday
September 6, 2010

1 Year Closed : 2.44 %
3 Year Closed : 3.44 %
5 Year Closed : 3.65 %

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BANK OF CANADA MAINTAINS OVERNIGHT RATE TARGET AT 1/4 PERCENT

Good afternoon,

Hope this reaches everyone well.

This week's news was much anticipated - the Bank of Canada's quarterly review. It seems they have decided to honour their commitment to keep prime rate where it is - at least for the time being. Even with the recent market upswing and fixed rates seeing an upward hike, the Bank of Canada held fast. This is good news for anyone who has yet to take advantage of the current low rates, and a welcome relief for those of us that may be coming up for renewal over the next while.

My message for the week is this: Relax a bit. Slow it down. Lately it seems there has been alot of fear in my clients and people I know: purchase now, lock in now, refinance now, now now now or regret it. There is some truth to this: we will not enjoy low rates, low home prices and the like forever - it is a great market to make a move in. Refinancing or renewing in the near future would be a smart choice too. Although prime rate held fast, this doesn't mean fixed rates will - look at the past week's rise. But buying a home is a HUGE deal, and you should not feel pressured into it. Although it seems anyone ever talks about with home purchase is rate these days, there is so much more in play, no? Taking time to find a home you're really going to enjoy, in the right neighborhood. Budgeting for all expenses associated (both forseen and unforseen). Negotiating OTHER important factors in your mortgage (flexibility of prepayment, terms, etc). Insurance to protect you and your new purchase. Lots of paperwork to go through, let's face it. Sounds like fun, right? For the most part, it can be - if you allow yourself the time to go through it all and feel good about it. I hope you do!

Let me know if you or someone you know needs guidance with any one of these things, and if it's not in my area of expertise, I am certain to know someone who can. I'll try my best to keep you "in the loop" in the meantime.

Have a read of the article below, and have a wonderful week. Talk soon!

Sarah

Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

Recent indicators point to the start of a global recovery from a deep, synchronous recession. Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report (MPR), although significant fragilities remain.

A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.

Given all of these factors, the Bank now projects that, relative to the July MPR, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. Growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period. The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year. This is a somewhat more modest recovery in Canada than the average of previous economic cycles.

The Bank now expects that the output gap will be closed in the third quarter of 2011, one quarter later than it had projected in July. Correspondingly, inflation is also expected to return to the 2 per cent target in the third quarter of 2011, one quarter later than in July's projection.

While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. Consistent with this conditional commitment, the Bank will continue to conduct longer-term Purchase and Resale Agreements based on existing terms and conditions.

DEBBIE THOMAS TMG
Tuesday, October 20, 2009 < Go Back >

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