Bank of Canada maintains overnight rate target at 1 ¾ per cent
FOR IMMEDIATE RELEASE
April 24, 2019
Available as: PDF
The Bank of Canada
today maintained its target for the overnight rate at 1 ¾ per cent. The
Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per
cent.
Global economic
growth has slowed by more than the Bank forecast in its January Monetary
Policy Report (MPR). Ongoing uncertainty related to trade conflicts
has undermined business sentiment and activity, contributing to a synchronous
slowdown across many countries. In response, many central banks have signalled
a slower pace of monetary policy normalization. Financial conditions and market
sentiment have improved as a result, pushing up prices for oil and other
commodities.
Global economic
activity is expected to pick up during 2019 and average 3 ¼ per cent over the
projection period, supported by accommodative financial conditions and as a
number of temporary factors weighing on growth fade. This is roughly in line
with the global economy’s potential and a modest downgrade to the Bank’s
January projection.
In Canada, growth
during the first half of 2019 is now expected to be slower than was anticipated
in January. Last year’s oil price decline and ongoing transportation
constraints have curbed investment and exports in the energy sector. Investment
and exports outside the energy sector, meanwhile, have been negatively affected
by trade policy uncertainty and the global slowdown. Weaker-than-anticipated
housing and consumption also contributed to slower growth.
The Bank expects
growth to pick up, starting in the second quarter of this year. Housing
activity is expected to stabilize given continued population gains, the fading
effects of past housing policy changes, and improved global financial
conditions. Consumption will be underpinned by strong growth in employment
income. Outside of the oil and gas sector, investment will be supported by high
rates of capacity utilization and exports will expand with strengthening global
demand. Meanwhile, the contribution to growth from government spending
has been revised down in light of Ontario’s new budget.
Overall, the Bank
projects real GDP growth of 1.2 per cent in 2019 and around 2 per cent in 2020
and 2021. This forecast implies a modest widening of the output gap, which will
be absorbed over the projection period.
CPI and measures of
core inflation are all close to 2 per cent. CPI inflation will likely dip in
the third quarter, largely because of the dynamics of gasoline prices, before
returning to about 2 per cent by year end. Taking into account the effects of
the new carbon pollution charge, as well as modest excess capacity, the Bank
expects inflation to remain around 2 per cent through 2020 and 2021.
Given all of these
developments, Governing Council judges that an accommodative policy interest
rate continues to be warranted. We will continue to evaluate the appropriate
degree of monetary policy accommodation as new data arrive. In particular, we
are monitoring developments in household spending, oil markets, and global
trade policy to gauge the extent to which the factors weighing on growth and
the inflation outlook are dissipating.
Information note
The next scheduled
date for announcing the overnight rate target is May 29, 2019. The next full
update of the Bank’s outlook for the economy and inflation, including risks to
the projection, will be published in the MPR on July 10, 2019.
Content Type(s): Press, Press Releases
The Bank’s new
forecast calls for real economic growth of 1.2 per cent this year, 2.1 per cent
next year and 2.0 per cent in 2021.
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