The Bank of Canada recently announced that they will be maintaining the current target for its overnight rate; this means that it will stay at 1%. The being said, the Bank Rate stands at 1.25%, while the Deposit Rate stands at 0.75%.

If you have been following these rate announcements, you will have noticed that the Bank of Canada has kept the overnight rate at 1% for the past year, as it continues to wait for the world economy to settle.

Why did the Bank of Canada keep the overnight rate?

What has happened is that the uncertainty around the global economic outlook as increased in the weeks since the Bank of Canada released its October Monetary Policy Report (MPR). When you take into consideration the conditions in global financial markets, you will see that they deteriorate as the debt crisis in Europe deepens.

The current recession in Europe is expected to become more pronounced than first anticipated, which results in increased deleveraging and tighter financial conditions.

What does an unchanged rate mean?

The unchanged rate means that Canadians will not have to worry about seeing higher interest rates to come for a few months. This also means that mortgage rates are going to keep at their current level for a little longer.

The Bank of Canada plans to monitor economic and financial developments in the Canadian and global economies, and set monetary policy consistent with achieving the 2% inflation target.

The next scheduled update for announced the overnight rate target is January 17th, 2012; there will also be a full update of the Bank of Canada’s outlook for the economy and inflation, which is expected to be published in the MPR on January 18th, 2012.

 

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