As expected over the past week or so, Bank of Canada today announced that it is holding its overnight interest rate steady at 0.75 per cent. Following BoC’s surprise rate cut in January (its first rate cut in nearly five years), banks followed suite by reducing their Prime rate, which meant homeowners with a variable-rate mortgage saw their rate drop (those with a fixed-rate mortgage would only benefit if they chose to refinance or reached the end of their mortgage term).
BoC could reduce its overnight lending rate at its next announcement on April 15, but that’s looking less likely following today’s announcement. Prior to today’s announcement, the market had priced in around a 60 per cent chance of another rate cut in April, but now its scaled back those predictions to 25 per cent.
Also following this morning rate announcement, the loonie gained in value slightly relative to the U.S. dollar. At close of business on Tuesday, the Canadian dollar was valued at 80.06 U.S. cents, but at 10:32 a.m. EST today, it had inched up to 80.29 U.S. cents. A lower Canadian dollar may be frustrating to Canadians traveling in the United States, but it does make Canadian exports more competitive, as the exchange rate makes prices more attractive, especially to the U.S. market.
At its last rate announcement in January, the central bank had predicted economic growth of 1.5 per cent in the first half of this year and that forecast remains in place today.