BANK OF CANADA Rate Announcement – Jan 18 , 2017
As expected the Bank of Canada did not change rates today and no changes on Prime rate (affecting Variable Rate mortgages) are expected. I’m not surprised there are no changes since Donald Trump is still the president elect (how long should this really take?). Of particular importance is the continuing extension of the date that interest rates will start increasing in Canada. Every year since 2008, so called experts have been calling for rates to increase “next year”. Here we are in 2017 and one of the latest articles is saying to watch for rates to increase in 2018, here we go again.
Observers will be watching inflation closely over the coming year. The Bank of Canada has always been firm that the #1 indicator of future rate increases is rising inflation. What causes rising inflation? If we look back one of the biggest causes is government stimulus, aka government spending, leading to large deficits. A recent article provides an excellent analogy of the course we are on in Canada relating to federal and provincial government spending. All the media has reported on consumer debt to income ratios but the government could be facing tough decisions on their debt load down the road if their appetite for stimulus continues.
The next Bank of Canada rate announcement is March 1, 2017