The Bank of Canada has maintained its overnight rate target at 0.25 per cent, the effective lower bound, and released its updated outlook for the economy and inflation.

The Bank of Canada maintained its overnight rate target at 0.25 per cent and announced it would be scaling back some of its interventions in the market now that economic conditions are beginning to improve.

The Bank of Canada announced on April 15 that it would keep its overnight rate target at 0.25 per cent and that no additional rate cuts should be expected.

This decision to hold rates steady came on the heels of three rate cuts in over a month, as the COVID-19 pandemic and plummeting oil prices exact a heavy toll on the Canadian economy.

In an unscheduled move, the Bank of Canada (BoC) recently announced it was cutting its overnight lending rate to 0.75 per cent, effective March 16. The move was made to counter the negative economic repercussions of the COVID-19 pandemic and plummeting oil prices.

By the numbers

Canada's central bank carries out monetary policy by influencing short-term interest rates. It does this by raising and lowering the target for the overnight rate, which is the interest rate at which major financial institutions borrow and lend one-day (or "overnight") funds among themselves. Not surprisingly, the overnight rate has a strong impact on the rates Canadians get from their lending institutions when they save or borrow money.

To help the average Canadian get a better grasp on the overnight lending rate, CREB®Now presents some of the key numbers.

Interest rates, economic uncertainty impacting Calgary market

For Calgarians Matt and Vanessa Haug, the stars aligned when they decided to purchase a new home in southeast Calgary.

The couple cited low interest rates and competitive house prices behind their decision to act now rather than wait – a sentiment slowly emerging since energy-sector uncertainty took hold in Calgary's housing market late last year.

"We got 2.69 [per cent] on a five-year fixed rate. It definitely impacted our decision," said Matt, who also cited house prices behind their decision to buy and noted the lower rate did not impact how much they ultimately spent on their new home.

Swings in economy are to be expected

Last week, the Bank of Canada surprised some Canadians when it lowered the overnight lending  rate from one to 0.75 per cent.

However, the decision to lower interest rates should not have been as big of a surprise as it was, nor should the fact that the banks have failed to lower their respective prime rates.

On the day before the rate drop, I told two separate groups of real estate investors – totaling 60 people  – that, in my opinion, there was as good of a chance that rates would decrease as there was they  would increase. The next morning, the Bank of Canada proved me right.

The Bank of Canada surprised many Canadians last week when it reduced the overnight interest rate from one to 0.75 per cent.

Bank of Canada governor Stephen Poloz cited plummeting oil prices as motivation behind the drop, which represents the first time the bank has changed the rate since September 2010.

"The drop in oil prices is unambiguously negative for the Canadian economy," he said.

"Canada's income from oil exports will be reduced, and investment and employment in the energy sector are already being cut."

For the first time since September 2010, the Bank of Canada has changed the overnight interest rate. By decreasing it.

The rate is now 0.75 per cent.

In a release from the bank:

The Bank of Canada has maintained the overnight interest rate at one per cent - unchanged since September 2010.

Here's the statement from the bank (published Dec. 3) :