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Bank of Canada Leaves Overnight Rate Unchanged at 1%

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Blog by John Jennings | March 1st, 2011

Bank of Canada Mark Carney Benchmark Rate Unchanged 1% West Vancouver Real Estate John Jennings
Photo credit: Adrian Wyld / THE CANADIAN PRESS

Bank of Canada
Governor Mark Carney announced this morning that he and the Bank of Canada were leaving the overnight lending rate unchanged at 1%, a historically low figure. Consequently, the prime rate will also remain unchanged at 3%, good news if you have a variable rate mortgage. 

The overnight lending rate is the rate that financial institutions use to borrow and lend from one another on the overnight market. In Canada, the overnight rate is targeted by the Bank of Canada to influence monetary policy.

"The recovery in Canada is proceeding slightly faster than expected and there is more evidence of the anticipated rebalancing of demand," the Bank of Canada Governor said. "While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes."

While the consensus going in to this morning's decision was that rates were to remain unchanged, there was the possibility of an increase. The rate going unchanged is good news for prospective home buyers.

Here is what some economists / analysts had to say:

"Not really a great surprise at all...a rate hike in April is not a 100% foregone conclusion. If anything, they will probably wait until the May meeting before they move off the fence and tighten policy further."
- Peter Buchanan, Senior Economist, CIBC World Markets (source)

"They slightly upgraded their outlook for the Canadian economy, acknowledging that the recovery has been proceeding slightly faster than expected...On balance it suggests no imminent rate move."
- Paul Ferley, Assistant Chief Economist, Royal Bank of Canada (source)

"Any expectation of an April rate hike is I think a little bit premature."
- David Tulk, Chief Canada Macro Strategist, TD Securities (source)