Economics and Personal Finances Economics Economic Indicators


Canadian Interest Rate Thread - 2007

 
Join the Forum Community!  
Canadian Interest Rate Thread - 2007 Can't Post
This thread is for all discussion pertaining to news, comments, announcements, and prediction of interest rate movement in Canada. (Key overnight interest rate mostly.)

Here is the latest for 2007: the Bank of Canada left the key lending rate unchanged at 4.25 per cent, the fifth consecutive unchanged announcement. The move comes amid a slowing US economy and its affect on the Canadian economy, most notably in export markets.

The bank still expects the economy will quicken to about 2.5 per cent in the first half of this year and that the economy will continue to operate “near its production capacity” throughout this year and next. Economists had slashed their forecasts for Canadian fourth-quarter growth to around 1 per cent amid weaker-than-expected exports.

Total consumer price inflation should average just above 1 per cent in the first half of this year and return to the 2-per-cent inflation target in early 2008, the Bank of Canada said.

The bank has left rates alone since May, following a series of hikes in prior months, as it tries to balance the risk of weaker exports against a record housing boom. The bank now judges that those risks are balanced.

Inflation has developed largely in line with the bank's expectations in October , with total inflation a little lower than projected and core inflation slightly higher. The bank figures that the Canadian economy was operating “at, or just above” its production capacity at the end of last year.

The central bank cut its growth estimate for the second half of last year to 1.6 per cent as softer U.S. demand for building materials and motor vehicles hit Canada's exports, and businesses adjusted inventories.

Details on the bank's views of the economy will come Thursday with the release of its monetary policy report update.

econmod
Broker / Moderator

Jan 16, 2007, 2:42 PM

Post #1 of 5 (1875 views)

Re: [econmod] Canadian Interest Rate Thread - 2007 [In reply to] Can't Post
BOC left the interest rate unchanged, prime is 4.25. I guess they are still a bit nervous about the rest of the country while Alberta runs hot. That and the States and their slow progress lately.
Ask a Finance Question 4 Free!
Finance
Banker

Mar 7, 2007, 10:27 PM

Post #2 of 5 (1847 views)

Re: [Finance] Canadian Interest Rate Thread - 2007 [In reply to] Can't Post
For the second quarter 2007 the Bank of Canada will maintain its target for the overnight rate at 4 1/4 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 1/2 per cent. Growth of the Canadian economy has been essentially in line with the Bank's expectations as set out in the January Monetary Policy Report Update. But inflation has been higher than expected. Pressures on capacity over the past year have been stronger than previously judged. Also, food and gasoline prices have recently risen more than expected. After considering the full range of indicators, the Bank now judges that the Canadian economy was operating just above its production capacity in the first quarter of this year.

Stronger-than-expected growth outside North America has led to rising demand for, and prices of, many commodities. However, the slowing U.S. economy has had a moderating effect on growth in Canada. With the U.S. slowdown now expected to be somewhat more prolonged than previously projected, net exports should exert a slightly greater drag on growth in 2007. The Canadian economy is projected to grow by 2.2 per cent in 2007 and 2.7 per cent in both 2008 and 2009, returning to its production capacity in the second half of 2007 and remaining there through 2008 and 2009. Core inflation is projected to decline to 2 per cent by the end of 2007. Total CPI inflation is projected to rise above the 2 per cent inflation target in the second half of this year, before returning to the target by mid-2008.

The upside risk to the Bank's inflation projection is that the recent strength of inflation could be more persistent than projected. The downside risk continues to come from the possibility of a more pronounced slowdown in the U.S. economy. The Bank continues to judge that the risks to its inflation projection are roughly balanced, although there is now a slight tilt to the upside. The current level of the target for the overnight rate is judged, at this time, to be consistent with achieving the inflation target over the medium term.

Join the Economics Community!

Barry
Mr. Do It All


Apr 27, 2007, 5:25 PM

Post #3 of 5 (1808 views)

Re: [econmod] Canadian Interest Rate Thread - 2007 [In reply to] Can't Post
As of the last week in May the overnight interest rate remained the same at 4 1/4.

Join the Econ-Community 4 FREE!
Mod
Webmaster / Moderator

Jun 1, 2007, 8:08 PM

Post #4 of 5 (1393 views)

Re: [econmod] Canadian Interest Rate Thread - July 2007 [In reply to] Can't Post
In an announcement that was probably known by all weeks in advance, the Bank of Canada stayed true to their hints and raised the overnight rate by one-quarter of one percentage point to 4 1/2 per cent. The operating band for the overnight rate is correspondingly increased, and the Bank Rate is now 4 3/4 per cent.

From the bank:

Economic growth and inflation in Canada in the first half of this year have been stronger than expected in the April Monetary Policy Report (MPR). Final domestic demand has remained the key driver of economic growth in Canada, bolstered by firm commodity prices. The Bank judges that the economy is now operating further above its production potential than was projected at the time of the April MPR. Both total CPI and core inflation have been higher than projected in April and are above the 2 per cent inflation target. Longer-term interest rates have increased and the Canadian dollar has appreciated sharply, moving well above the trading range assumed in the last MPR.

The Canadian economy is now projected to grow by 2.5 per cent in 2007, somewhat stronger than was expected in April, and to grow somewhat more slowly in 2008 and 2009 than previously projected. In this new projection, higher interest rates across the yield curve and a higher assumed range for the Canadian dollar of 93 to 95.5 cents U.S. act to moderate growth in 2008 and 2009 to an average of about 2 1/2 per cent. This brings aggregate demand and supply in Canada back into balance in 2009.

Inflation is projected to be slightly higher and more persistent than in the April MPR. However, as excess demand diminishes, total CPI and core inflation should decline to 2 per cent by early 2009.

There are both upside and downside risks to the Bank's inflation projection. The main upside risk is that household demand in Canada could be stronger than expected. The main downside risks are related to the higher Canadian dollar and the ongoing adjustment in the U.S. housing sector. In the context of the Bank's new projection, these risks appear to be roughly balanced.

In line with this outlook, the Bank is raising the target for the overnight rate to 4 1/2 per cent. Some modest further increase in the overnight rate may be required to bring inflation back to the target over the medium term.

An analysis of the Bank's outlook for growth and inflation, including economic and financial developments and risks to the projection, will be set out in the Monetary Policy Report Update, to be published on 12 July 2007.

econmod
Broker / Moderator

Jul 10, 2007, 11:55 AM

Post #5 of 5 (1240 views)

  Visit Our Blog