- Bank Of Canada
The Bank of Canada announced that it decided to keep its target for the overnight rate at 0.50%, indicating that a strong start to the year will disappear quickly on the background of the weak second quarter results. Meanwhile, the Bank Rate remained correspondingly at 0.75% and the deposit rate was at 0.25%. The central bank emphasised the negative effects of wildfires that engulfed the western province, Alberta, in May, bringing a lot of disruption and temporarily holding back oil production. According to the Bank of Canada forecast, the economic damage caused by the wildfires will cut around 1.25 percentage points from the real GDP growth in Q2. This is on top of the previous downward revision to 1% from 2.2% back in April. Situation, however, is looking better in the third quarter, as oil production is projected to resume and fire-damage repaired.
Meanwhile, the Bank highlighted that the Canadian housing market continues to display strong regional divergences, reinforced by the complex adjustment underway in the economy. In this context, household vulnerabilities have moved higher. At the same time, inflation does not seem to be a big issue for the Bank of Canada right now, as it is roughly in line with the Bank's expectations. More specifically, the total CPI inflation has risen recently, largely due to movements in gasoline prices, but remained slightly below the 2% target.
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