July 2016 key interest rate decision: BoC holds rate

By: Dominic Licorish on July 13, 2016

With the past year’s troubled economic climate and projected slow growth on the horizon, the Bank of Canada (BoC) has decided to keep the key interest rate at 0.5%.

The BoC released its interest rate decision as well as its quarterly economic report this morning. As expected, the financial fallout of Brexit as well as Alberta’s massive wildfire has negatively impacted the BoC’s outlook for Canada’s GDP growth for the upcoming year.

Despite global uncertainty, the BoC press release remains positive that the fundamentals are in place for growth to pick up in the near future. Real GDP is expected to grow by 1.3% this year and bounce back to 2.2% in 2017 and 2.1% in 2018. Inflation is expected to return to 2% next year meaning that Canada should close the output gap (having a lower GDP than inflation) it has faced this year.

While the economy has a big impact on the interest rates, the interest rates have a secondary impact on your mortgage rates. Low overnight rates for banks means low borrowing costs for you, so this economic forecast is good news for people who plan on getting a mortgage any time soon. You can be sure that mortgage rates will remain low through the end of this year and probably the next.