The Bank of Canada kept its benchmark interest rate unchanged at 1.75 per cent Wednesday, despite a few dark clouds appearing on Canada’s economic horizon.
The bank has raised its key rate five times since the summer of 2017, attempting to keep inflation in an acceptable range, typically between one and three per cent annually. The bank last raised its rate in October, before deciding to do nothing in December and then again today.
The bank’s rate impacts consumers by raising or lowering the rates that Canadian borrowers and savers get for lines of credit, savings accounts, and variable-rate mortgages.
The bank also downgraded its expectations for Canada’s economy this year. A 25 per cent plunge in the price of oil since October has had a “material impact” on the economy, to the point where the bank is now forecasting just 1.7 per cent growth this year. Three months ago, it was expecting 2.1 per cent growth.
But despite that slowdown, the bank gave every indication that it plans to raise the rate again sooner rather than later. “The policy interest rate will need to rise over time into a neutral range to achieve the inflation target,” the bank said.
Bank of Canada governor Stephen Poloz and deputy governor Carolyn Wilkins will explain the central bank’s decision at a press conference starting at 11:15 a.m. ET.