Bank of Canada Interest Rate Announcement - December 9, 2020
The Bank of Canada maintained its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank is also continuing its quantitative easing (QE) program, purchasing at least $4 billion of Government of Canada bonds per week and re-affirmed its forward guidance on future interests moves, committing to holding the policy rate at 0.25 per cent until slack in the economy is absorbed and inflation is sustainably trending at 2 per cent. In the statement accompanying the decision, the Bank noted that the recovery underway will be choppy due to rising cases of COVID-19 and will continue to require extraordinary monetary support from the bank.
Current slack in the economy, along with low energy prices, is holding Canadian inflation well below its target of 2 per cent. Total CPI inflation is trending under 1 per cent while the Bank of Canada’s measures of “core” inflation remain below target despite the massive expansion of the Bank’s balance sheet necessary to facilitate its quantitative easing program. With the arrival of viable vaccines, we may see the Canadian economic recovery materially accelerate in the second half of 2021. If that occurs, the first stage of tighter monetary policy from the Bank will be how and when it decides to taper purchases of government bonds over the next year. As it does, we may start to see a divergence in variable and fixed rates by early summer as bond yields rise and fixed mortgage rates move marginally higher.
The Bank of Canada maintained its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank is also continuing its quantitative easing (QE) program, purchasing at least $4 billion of Government of Canada bonds per week and re-affirmed its forward guidance on future interests moves, committing to holding the policy rate at 0.25 per cent until slack in the economy is absorbed and inflation is sustainably trending at 2 per cent. In the statement accompanying the decision, the Bank noted that the recovery underway will be choppy due to rising cases of COVID-19 and will continue to require extraordinary monetary support from the bank.
Current slack in the economy, along with low energy prices, is holding Canadian inflation well below its target of 2 per cent. Total CPI inflation is trending under 1 per cent while the Bank of Canada’s measures of “core” inflation remain below target despite the massive expansion of the Bank’s balance sheet necessary to facilitate its quantitative easing program. With the arrival of viable vaccines, we may see the Canadian economic recovery materially accelerate in the second half of 2021. If that occurs, the first stage of tighter monetary policy from the Bank will be how and when it decides to taper purchases of government bonds over the next year. As it does, we may start to see a divergence in variable and fixed rates by early summer as bond yields rise and fixed mortgage rates move marginally higher.
Bank of Canada Interest Rate Announcement - October 28, 2020
The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank is also continuing its quantitative easing (QE) program, though re-calibrated to target longer-term bonds and slightly scaled back from purchasing $5 billion per week in Government of Canada bonds to $4 billion per week. The Bank also reiterated forward guidance on future interests moves, committing to holding the policy rate at 0.25 per cent until slack in the economy is absorbed and inflation is sustainably trending at 2 per cent. In the statement accompanying the decision, the Bank noted that the Canadian economy is recovering, though at a highly uneven rate, with the pandemic particularly affecting low-income workers. Overall, the Bank expects a decline in Canadian real GDP of 5.5 per cent this year, before growing 4 per cent next year. Inflation is expected to remain below its 2 per cent target through 2022.
With the Bank committing to holding its policy rate at 0.25 per cent until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time. Given the Bank's forward guidance on interest rates and its projection for inflation, those low rates are anticipated to remain in place until 2023, providing a significant boost to an already strong BC housing market.
Bank of Canada Interest Rate Announcement - September 9, 2020
The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank is also continuing its quantitative easing (QE) program, with large scale asset purchases of at least $5 billion per week in Government of Canada bonds. In the statement accompanying the decision, the Bank noted that the Canadian economy is evolving broadly in line with expectations, with a strong re-opening phase to be followed by slower, uneven growth and heavily reliant on policy support. Inflation remains close to zero, with downward pressure from energy prices and travel services, and is expected to remain below the Bank's 2 per cent target for some time. The Bank re-emphasized its commitment to keep its policy rate at its effective lower bound of 0.25 per cent until slack is absorbed in the economy and inflation stabilizes around its 2 per cent target. Its QE program will continue until a recovery is well underway. Given the Bank's' current projections, that means rates could be on hold until 2022.
A recovery in the housing market is well underway with sales in BC surpassing their pre-COVID-19 level. With the Bank committing to holding its policy rate at 25 basis points until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time, providing a significant boost to the BC housing market.
The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank is also continuing its quantitative easing (QE) program, with large scale asset purchases of at least $5 billion per week in Government of Canada bonds. In the statement accompanying the decision, the Bank noted that the Canadian economy is evolving broadly in line with expectations, with a strong re-opening phase to be followed by slower, uneven growth and heavily reliant on policy support. Inflation remains close to zero, with downward pressure from energy prices and travel services, and is expected to remain below the Bank's 2 per cent target for some time. The Bank re-emphasized its commitment to keep its policy rate at its effective lower bound of 0.25 per cent until slack is absorbed in the economy and inflation stabilizes around its 2 per cent target. Its QE program will continue until a recovery is well underway. Given the Bank's' current projections, that means rates could be on hold until 2022.
A recovery in the housing market is well underway with sales in BC surpassing their pre-COVID-19 level. With the Bank committing to holding its policy rate at 25 basis points until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time, providing a significant boost to the BC housing market.
Bank of Canada Interest Rate Announcement - July 15, 2020
The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. In addition, the Bank is continuing its quantitative easing program, committing to large-scale asset purchases of at least $5 billion per week of Government of Canada bonds along with continued purchases of provincial and corporate bonds. In the statement accompanying the decision, the Bank noted that the economic outlook remains extremely uncertain, but global economic activity is picking up. Financial conditions have improved, oil prices have rebounded, and pent-up demand in the Canadian economy has lead to a bounce in output and employment. The Bank expects that the Canadian economy will contract close to 8 per cent this year, but will build momentum into the second half of this year, leading to the economy growing 5.1 per cent in 2021. The Bank further noted that the economy will require extraordinary monetary policy support and the Bank will hold its policy rate at its effective lower bound until slack in the economy is absorbed and inflation has returned to its 2 per cent target.
Like the Bank, BCREA is projecting that the Canadian, and BC economy will start to recover in the third quarter. Positive signs of recovery are emerging in the housing market, with sales in BC recovering their pre-COVID-19 level in June. With the Bank committing to holding its policy rate at 25 basis points until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time, providing a significant boost to the BC housing market.
The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. In addition, the Bank is continuing its quantitative easing program, committing to large-scale asset purchases of at least $5 billion per week of Government of Canada bonds along with continued purchases of provincial and corporate bonds. In the statement accompanying the decision, the Bank noted that the economic outlook remains extremely uncertain, but global economic activity is picking up. Financial conditions have improved, oil prices have rebounded, and pent-up demand in the Canadian economy has lead to a bounce in output and employment. The Bank expects that the Canadian economy will contract close to 8 per cent this year, but will build momentum into the second half of this year, leading to the economy growing 5.1 per cent in 2021. The Bank further noted that the economy will require extraordinary monetary policy support and the Bank will hold its policy rate at its effective lower bound until slack in the economy is absorbed and inflation has returned to its 2 per cent target.
Like the Bank, BCREA is projecting that the Canadian, and BC economy will start to recover in the third quarter. Positive signs of recovery are emerging in the housing market, with sales in BC recovering their pre-COVID-19 level in June. With the Bank committing to holding its policy rate at 25 basis points until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time, providing a significant boost to the BC housing market.
Canadian Employment (Apr) - May 8, 2020
Canadian employment fell further in April by 2 million jobs (-11%, m/m), bringing cumulative losses to 3 million since February. The unemployment rate rose by 5.3 percentage points from 7.8% to 13%, as the impact from the closure of non-essential businesses and travel restrictions were not fully reflected in last month's job report. The last recession to come close to this was 1981/82 when the peak unemployment rate was 13.1%. The unemployment rate would have been 17.8% in April if adjusted to include those wanting to work (and had worked recently), but were unable to because of the pandemic.
Job losses continued to spread across the country, with the largest declines in Ontario (-690k), Quebec (-560k), BC (-264k) and Alberta (-240k). The decline in employment was driven by the private sector (-1.87 million), while the public sector reported a smaller decline of -76.8k and self-employed were down by -43.1k. The most impacted industries continue to be in the service-sector, led by wholesale and retail trade (-14%) and accommodation and food services (-34.3%). The impact also spilled over to the goods-producing sector in April, led by declines in construction (-314K) and manufacturing (-267k), partially due to the closure of all construction sites in Quebec at the end of March. Compared to the same month last year, Canadian employment was down by -15% (-2.8 million).
Meanwhile, employment in BC fell by 264,000 jobs (-11%, m/m) in April, increasing the provincial unemployment rate by 4.3 percentage points from 7.2% to 11.5%. Three-quarters of the decline was in full-time work. Employment was down in all industries except for utilities. Compared to one year ago, employment in BC was down by 16.4% (-421k) jobs.
As restrictions around the pandemic are gradually eased in many provinces, we can expect some people to start returning to work, or have their hours worked increase. The magnitude and timing will largely depend on businesses and employees' willingness to return to work given ongoing health concerns. In April, there were about 3.8 million people who had some type of attachment to a specific job but were not working due to the pandemic, suggesting that they could return to the same job in the coming months.
Canadian employment fell further in April by 2 million jobs (-11%, m/m), bringing cumulative losses to 3 million since February. The unemployment rate rose by 5.3 percentage points from 7.8% to 13%, as the impact from the closure of non-essential businesses and travel restrictions were not fully reflected in last month's job report. The last recession to come close to this was 1981/82 when the peak unemployment rate was 13.1%. The unemployment rate would have been 17.8% in April if adjusted to include those wanting to work (and had worked recently), but were unable to because of the pandemic.
Job losses continued to spread across the country, with the largest declines in Ontario (-690k), Quebec (-560k), BC (-264k) and Alberta (-240k). The decline in employment was driven by the private sector (-1.87 million), while the public sector reported a smaller decline of -76.8k and self-employed were down by -43.1k. The most impacted industries continue to be in the service-sector, led by wholesale and retail trade (-14%) and accommodation and food services (-34.3%). The impact also spilled over to the goods-producing sector in April, led by declines in construction (-314K) and manufacturing (-267k), partially due to the closure of all construction sites in Quebec at the end of March. Compared to the same month last year, Canadian employment was down by -15% (-2.8 million).
Meanwhile, employment in BC fell by 264,000 jobs (-11%, m/m) in April, increasing the provincial unemployment rate by 4.3 percentage points from 7.2% to 11.5%. Three-quarters of the decline was in full-time work. Employment was down in all industries except for utilities. Compared to one year ago, employment in BC was down by 16.4% (-421k) jobs.
As restrictions around the pandemic are gradually eased in many provinces, we can expect some people to start returning to work, or have their hours worked increase. The magnitude and timing will largely depend on businesses and employees' willingness to return to work given ongoing health concerns. In April, there were about 3.8 million people who had some type of attachment to a specific job but were not working due to the pandemic, suggesting that they could return to the same job in the coming months.
Canadian Monthly Real GDP (February) - April 30, 2020
After three months of growth, Canadian real GDP was essentially flat in February as disruptions to education services and the transportation and warehousing sector stalled the economy. Excluding those sectors, economic growth was 0.2 per cent with 13 of 20 sub-sectors recording increased output. Activity in the real estate sector rose 5.9 per cent in February, the largest increase since December 2017.
Statistics Canada has also made a flash estimate for March 2020 real GDP which it estimates declined a staggering 9 per cent on a monthly basis due to the COVID-19 pandemic and associated mitigation measures. If that estimate is accurate, first quarter real GDP will contract by close to 10 per cent on an annualized basis. As dramatic as the first quarter decline appears, it will almost certainly be quickly overshadowed by what most expect to be a 30 per cent or more annualized decline in the second quarter. Note that those are annualized estimates. The actual peak-to-trough decline in Canadian real GDP is estimated at 10-15 per cent before things begin to normalize and growth rebounds in the third and fourth quarter of this year.
After three months of growth, Canadian real GDP was essentially flat in February as disruptions to education services and the transportation and warehousing sector stalled the economy. Excluding those sectors, economic growth was 0.2 per cent with 13 of 20 sub-sectors recording increased output. Activity in the real estate sector rose 5.9 per cent in February, the largest increase since December 2017.
Statistics Canada has also made a flash estimate for March 2020 real GDP which it estimates declined a staggering 9 per cent on a monthly basis due to the COVID-19 pandemic and associated mitigation measures. If that estimate is accurate, first quarter real GDP will contract by close to 10 per cent on an annualized basis. As dramatic as the first quarter decline appears, it will almost certainly be quickly overshadowed by what most expect to be a 30 per cent or more annualized decline in the second quarter. Note that those are annualized estimates. The actual peak-to-trough decline in Canadian real GDP is estimated at 10-15 per cent before things begin to normalize and growth rebounds in the third and fourth quarter of this year.
Bank of Canada Interest Rate Announcement - April 15, 2020
The Bank of Canada maintained its overnight policy rate at 0.25 per cent this morning, a level it considers to be its effective lower bound. The Bank also announced additional new measures to support the Canadian financial system. In its statement, the bank noted that efforts necessary to contain the spread of COVID-19 have caused a sudden and deep contraction in economic activity and employment worldwide. The bank judges the current outlook to be too uncertain to provide a complete forecast, though it expects real GDP growth to decline 1-3 per cent in the first quarter of 2020 and a further 15-30 per cent (annualized) drop in the second quarter.
To offset any potential dysfunction in financial markets and to keep credit channels operating smoothly, the Bank will continue its purchase of Government of Canada as well as provincial government, and even investment grade corporate bonds in the secondary market. These measures, along with those implemented by the Federal Government, will help to ease pressure on Canadian borrowers at all levels, from large corporations, to small businesses to households.
The Bank of Canada maintained its overnight policy rate at 0.25 per cent this morning, a level it considers to be its effective lower bound. The Bank also announced additional new measures to support the Canadian financial system. In its statement, the bank noted that efforts necessary to contain the spread of COVID-19 have caused a sudden and deep contraction in economic activity and employment worldwide. The bank judges the current outlook to be too uncertain to provide a complete forecast, though it expects real GDP growth to decline 1-3 per cent in the first quarter of 2020 and a further 15-30 per cent (annualized) drop in the second quarter.
To offset any potential dysfunction in financial markets and to keep credit channels operating smoothly, the Bank will continue its purchase of Government of Canada as well as provincial government, and even investment grade corporate bonds in the secondary market. These measures, along with those implemented by the Federal Government, will help to ease pressure on Canadian borrowers at all levels, from large corporations, to small businesses to households.
Bank of Canada Interest Rate Announcement - March 27, 2020
For the second time this month, the Bank of Canada has lowered its overnight policy rate before its regularly scheduled announcement date, taking the overnight rate down a further 50 basis points to 0.25 per cent. That level is what the Bank considers its effective lower bound, meaning it can not reduce rates further without potentially disrupting key short-term funding markets.
The Bank also announced two new programs to ensure the continued smooth functioning of credit markets and to promote credit availability. The first, the Commercial Paper Purchase Program, is targeted at alleviating strains in the short-term funding market and the second entails the Bank purchasing Government of Canada bonds in the secondary market. The latter program is a type of what is generally called "quantitative easing" though the Bank's program is targeted at all maturities, rather than longer term yields as in traditional quantitative easing.
All of these actions represent a serious and significant amount of firepower aimed at keeping the Canadian financial system and credit markets functioning during this extraordinary time. If successful, we should see currently elevated risk spreads on mortgage products start to decline, reversing recent increases in Canadian mortgage rates.
For the second time this month, the Bank of Canada has lowered its overnight policy rate before its regularly scheduled announcement date, taking the overnight rate down a further 50 basis points to 0.25 per cent. That level is what the Bank considers its effective lower bound, meaning it can not reduce rates further without potentially disrupting key short-term funding markets.
The Bank also announced two new programs to ensure the continued smooth functioning of credit markets and to promote credit availability. The first, the Commercial Paper Purchase Program, is targeted at alleviating strains in the short-term funding market and the second entails the Bank purchasing Government of Canada bonds in the secondary market. The latter program is a type of what is generally called "quantitative easing" though the Bank's program is targeted at all maturities, rather than longer term yields as in traditional quantitative easing.
All of these actions represent a serious and significant amount of firepower aimed at keeping the Canadian financial system and credit markets functioning during this extraordinary time. If successful, we should see currently elevated risk spreads on mortgage products start to decline, reversing recent increases in Canadian mortgage rates.
Bank of Canada Interest Rate Announcement - March 13, 2020
Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is "having serious consequences for Canadian families, and for Canada's economy". In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.
We expect this rate cut to be followed by an additional reduction of the Bank's overnight rate at its April 2020 meeting.
Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is "having serious consequences for Canadian families, and for Canada's economy". In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.
We expect this rate cut to be followed by an additional reduction of the Bank's overnight rate at its April 2020 meeting.
Bank of Canada Interest Rate Announcement - March 4, 2020
The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent. This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak. In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.
Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.
Canadian bond yields have declined significantly with 5-year bond yields falling below 1% for the first time since 2017. Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower, though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.
The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent. This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak. In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.
Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.
Canadian bond yields have declined significantly with 5-year bond yields falling below 1% for the first time since 2017. Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower, though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.
Source from BCREA