April 22nd, 2008
In keeping with its mandate to keep inflation in Canada at the 2% target, the Bank of Canada today announced that it was lowering its overnight lending rate by 50 basis points (one-half per cent) to 3%. Citing deepening economic woes in the U.S., tightening credit conditions, and overall instability in the world economy, it’s hoped that this economic stimulus, along with strong domestic demand and high employment, will help keep Canada’s economy performing well.
The Bank forecasts that Canada’s economy will grow by 1.4% this year, 2.4% in 2009, and 3.3% in 2010 when the Bank also projects that inflation will reach the target 2%. The overnight rate has been lowered 150 basis points (1.5%) since December of last year.
The press release hinted that this may be the last of the rate cuts for a while – the timing of any further monetary stimulus will depend on global conditions and their effect on Canadian inflation.
This news is positive to anyone on a variable-rate mortgage, which is tied to the central bank rate. Fixed-rate mortgages are slower to come down, but should fall into line with the rate cut. With more and more choices on the market than in recent years, buyers are in a good position to extend their purchasing power and get into their perfect place.
The Bank’s next meeting to discuss interest rates is June 10, 2008.
Read the full Bank Of Canada press release here.