Bank of Canada Headquarters
Bank of Canada Overnight Rate
Will the BOC Look at Lower Rates As Other Major Central Banks?
Starts Wednesday, October 28, 2020 at 14:00
Updated Wednesday, October 28, 2020
The likelihood of the Bank of Canada cutting interest rates in the near future is inching lower after the outcome of the recent general elections. Following Justin Trudeau’s victory, there is a higher anticipation among investors for increased fiscal spending and strengthening in the Canadian economy. The Liberal government has already stated its intention to increase budget deficits by boosting spending in a bid to revive Canada’s economic growth. One of the key issues mentioned in Trudeau’s campaigns concerned his plans to expand the budget deficit to nearly twice as high during the fiscal year 2020. So far, the BOC has held the benchmark interest rate steady in 2019 at 1.75%, as employment rose at a steady pace and inflation held around the bank’s target of 2%. But, as coronavirus spread around the globe and the economy has stagnated, the BOC cut rates three times back then, bringing them to 0.25%. They have been on hold since then, but they might start looking at lower rates as the economy weakens again. Please follow us for live coverage of this event by experienced analysts on our Economic Calendar section.
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About Bank of Canada Overnight Rate
Also known as the interest rates or key interest rate, this is the main interest rate used by the Bank of Canada (BOC) o refinance its operations, providing liquidity to the secondary level of the banking system. The rate is set by the governing council members at the BOC. The BOC generally decides to increase interest rates when the economy is performing well and inflation is increasing. This means that the borrowing costs of banks would increase causing the availability and liquidity to fall. This is supposed to strengthen the CAD. However, because the interest rate decisions are usually priced in by the market, the effect they have on the currency diminishes. Instead, the accompanying statement has a greater impact on the CAD.