Bank of Canada drops rate guidance, lowers growth forecast – Ask Bruce Coleman, Vancouver Mortgage Broker
OTTAWA — There has been a sea change at the Bank of Canada.
No longer are policymakers setting a specific monetary course for interest rates. Instead, for the first time in 18 months, they have dropped any reference to borrowing costs eventually rising — adopting a neutral position and waiting to see which way economic winds blow.
What hasn’t changed, however, is the central bank’s biggest policy lever — its benchmark lending rate, which has remained at a near-record low of 1% since September 2010 and which has been locked in by lower-for-longer inflation and weaker-than-forecast growth.
Those policymakers — now under the leadership of Stephen Poloz, who replaced Mark Carney in June — on Wednesday kept their key rate as is, and where it will likely remain until mid- or late 2015.
Any rate change will be “very clearly later than we thought,” Mr. Poloz, 58, told reporters in Ottawa.
But the bank governor would not comment on what direction — up or down — rates will eventually take. Instead, Mr. Poloz said the process of balancing future data will be not a matter of “engineering” but “ risk-management.”
Canada’s economy is forecast to grow by 1.6% this year, down from the bank’s July outlook of 1.8%. For 2014, the estimate has fallen to 2.5% from 2.8% ahead of 3% in 2014, unchanged from July.
Global growth, however, is expected to remain stable at 2.8% this year, but advance at a weaker pace in 2014 — 3.4% compared to the earlier estimate of 3.5% — and also slower in 2015 — 3.6% rather than 3.7%.