It was not unexpected but at the regular Bank of Canada rate announcement bank Governor Tiff Macklem said the central bank would hold its current low 0.25 per cent rate, and would not go into negative territory.
At the press conference Wednesday he said, “Our message to Canadians is that interest rates are very low and they’re going to be there for a long time, ” to which he added, ” “If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time”. In fact he says the bank won’t likely change rates until inflation reaches a steady 2.0 per cent which might not happen until 2023.
In July the bank’s policy report said the economy would pick up in the third quarter but then likely slow. That prediction seems likely as COVID cases have climbed leading to the certain restrictions on businesses being re-imposed. The central bank however is counting on there being no more general lockdowns as there was previously this year.
Bank of Canada governor Tiff Macklem says the economic recovery will be uneven and so the lending rate will be kept low. (adrian Wyld The Canadian Press)
The bank predicts around a six per cent decline in the GDP this year, it also predicts the economy expanding up to 4.9 per cent next year. The report also said the bank would continue to buy government bonds at the rate of at least five billion per week.
By signalling long term low rates, the idea is to suggest to those with the resources to make big purchases like houses, or vehicles or new equipment purchases for business, that the interest rates on loans would not surprise them with extra expense for quite some time and it would be a good time to spend, which would in turn help the economy as a whole.
What effect this will have on the economy is unknown as other recent surveys show a high percentage of Canadians are feeling very insecure about their financial future in the wake of pandemic effects on their jobs and the economy.
Many analysts however are citing the upcoming US election results as being an unknown as to how world markets will react to the results, and how that would also affect the Canadian dollar and trade.
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