Bank of Canada keeps interest rate at 1.25%

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The Bank of Canada has kept its benchmark interest rate at 1.25 per cent, with a caveat- expect a rate hike soon as inflation heats up.

The rate of 1.25 per cent impacts rates that Canadians get from retail banks for savings accounts and debt such as mortgages and lines of credit.

The economy performed slightly weaker than the bank expected in the first three months of 2018, which is one of the primary reasons there hasn’t been a hike this time but the central bank is optimistic that the economy will pick up steam in the latter half of the year.

“The economy is projected to operate slightly above its potential over the next three years, with real GDP growth of about two per cent in both 2018 and 2019, and 1.8 per cent in 2020,” the bank said.

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Two major factors the bank considered while making its decision was weakness in the housing market plus trade uncertainties that are weighing on the economy’s prospects.

The central bank is banking on a boost from increased foreign trade and higher wages for Canadians.

The bank is clearly warning Canadians of a rate hike the next time round and to take care of their finances in order to absorb the future shock.

The bank’s next scheduled announcement is May 30. Investors in financial instruments known as interest rate swaps predict about a 50/50 chance of a hike that day. – CINEWS

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