Bank of Canada Promises Caution in Interest Rate Hikes

Date
25.10.2017

Central bank holds overnight rate – this time – and will proceed tentatively with future rises

Bank of Canada Promises Caution in Interest Rate Hikes hero image
Central bank holds overnight rate – this time – and will proceed tentatively with future rises

Holding the overnight interest rate steady in its October 25 announcement, the Bank of Canada warned that future rate hikes would be likely, although at a more tentative pace than previously anticipated.

Following two interest rate hikes in July and September at consecutive policy meetings, the central bank said it had decided to hold off with another rate hike – for now. This corresponds with the BC Real Estate Association’s prediction in September that interest rates won’t rise again until 2018.

In a statement Wednesday, the bank said that its “current stance of monetary policy is appropriate” – suggesting that it will continue with its plan to raise interest rates further.

However, the bank added, “While less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate.”

The bank said its decision was partly affected by household debt levels, pointing out, “Housing and consumption are forecast to slow in light of policy changes affecting housing markets and higher interest rates. Because of high debt levels, household spending is likely more sensitive to interest rates than in the past.”

The Bank of Canada’s next overnight rate policy meeting is scheduled for December 6.

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