Bank of Canada holds interest rate at 0.5%

Bank of Canada holds interest rate at 0.5%

The Alberta fires may affect economy expectations


The Bank of Canada’s key interest rate will remain at 0.5 per cent, as widely expected.

Even still, economists will be scrutinizing the central bank’s statement for clues about how it views the economy.

The last time the Bank of Canada made a rate announcement it raised its expectations for economic growth in its monetary policy report.

However, the massive forest fire in Alberta that resulted in oilsands production shutdowns earlier this month have cut into expectations for the economy in the second quarter.

The problems are compounded by recent economic data that has suggested the first quarter will end on a weak note.

The Bank of Canada’s target for the overnight rate is a key factor affecting the rates set by Canada’s big banks for variable rate mortgages and lines of credit.

Bank of Montreal senior economist Robert Kavcic wrote in a recent note to clients that the recent run of economic data has been soft, especially the trade figures.

“Look for a relatively straightforward policy statement from the Bank of Canada, with no move on interest rates but a somewhat more cautious tone than in April,” Kavcic said.