Question

What is the outlook for interest rates in Canada? Some possible questions you may wish to explore include: o Impact of recent rate hikes on the Canadian economy? Housing market? o Expectations for the interest rate over the next year
o Interest rate o Housing market o Unemployment rate o Economic projections

Answer 1

The Bank of Canada left its interest rate unchanged at 1.75% on October 30, 2019. It remained the highest since December 2008. The Bank rate remained at 2% and deposit rate at 1.5%.

The economy has weakened and global growth is expected to slow down. This reflects the uncertainty associated with trade conflicts and restraining business investment, trade and global growth. Business investment and exports are likely to contract before expanding again in coming years. Simultaneously, government spending and lower borrowing rates are supporting domestic demand and service sector remains robust.

Employment is showing rising trend and wage growth is picking up, although with some variations in regions. Consumer spending has reduced but will be supported by solid income growth. However, housing activity is picking up in most markets.

The Bank projects GDP will grow by 1.5% in this year and 1.7% in the year 2020 and 1.8% in the year 2021. Inflation is around 25. Overall bank expects inflation to be within 2%.

Conclusion :- Canada's economy will be continuously tested as trade conflicts remain uncertain. The bank will be monitoring the extent to which global slowdown spreads beyond manufacturing and investment. It will be paying close attention to consumer spending and housing activity as well as fiscal policy developments.