Struggling dollar expected to rebound, Bank of Canada says

Holding rate at 0.5 percent, bank announces

The Bank of Canada announced yesterday it’s holding the key interest rate at 0.5 per cent.

“Prices for oil and other commodities have declined further and this represents a setback for the Canadian economy,” the bank said in its Monetary Policy Outlook on Jan. 20.

While the dollar is struggling now, the bank expects the Canadian economy to recover by late 2016.

Canadian Interest Rates over last 10 years

Low: 0.25% in 2009
Average (2006-2016): 1.69%
High: 4.50% in 2007

Rate averages by year:
2006: 4.06%
2007: 4.35%
2008: 3.04%
2009: 0.43%
2010: 0.59%
2011: 1.00%
2012: 1.00%
2013: 1.00%
2014: 1.00%
2015: 0.65%

Source: Bank of Canada

“The Canadian dollar has declined significantly; it typically takes up to two years for the whole impact of a lower dollar to take effect,” bank Governor Stephen Poloz said during an interview in Ottawa.

Some Toronto-area real estate agents say they are not concerned the bank’s interest rate will affect housing sales.

“In the GTA, this will have virtually no impact,” real estate agent Jacqueline Tai said. “We have high consumer confidence, a steady flow of buyers entering the market and low inventory.”

In the rest of Canada, larger, external factors are depressing their markets, so the Bank of Canada announcement will have a neutral effect, Tai added.

Last year was a “little disappointing, but we expect a gradual strengthening to resume,” Poloz said.