The Bank of Canada elected to keep its benchmark interest rate steady at 0.25% on Wednesday indicating it will keep it there until the recovery is well underway. This benchmark rate helps to determine what the banks set as their Prime rate which is currently at 2.45%.
The central bank meets 8 times a year to set its benchmark interest rate. This rate impacts the rates that Canadians get on things like mortgages and savings accounts at banks. The bank will normally lower its rate when it wants to stimulate borrowing and investing and raises it when it wants to slow things down. There were several drops in the rate last year due to COVID.
The Bank of Canada indicated that “Growth in the first quarter of 2021 is now expected to be negative,” and that GDP will shrink in the first quarter of the year. The economy shrank by 5.5% in 2020.
The bank feels the prospect of vaccines being deployed this year will help encourage a strong recovery for the economy as the year moves on.
“The outlook for Canada is now stronger and more secure than in the October projection, thanks to earlier than expected availability of vaccines and significant ongoing policy stimulus.” the bank said.
Canadians have a record amount of cash saved during the pandemic and the government is hoping this will soon be put to use and spent on goods and services this year. Once things open up they hope that spending will help in the recovery.
Fixed mortgage rates continue to remain steady at all times lows with most fixed rates being under 2% at the moment.
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