Forecasts Made By Big Bank Concerning The Rates

A prediction was made by the big bank that the overnight target rate will remain stagnant for the Bank of Canada until the year 2019, where it will go up from 0.5% to 1%. This will create a path for another interest rate to go up in the year 2020, where it will then mount in at 1.25% at the latter part of the year. TD mentioned in its prediction; “Slower trend economic growth will also restrain the level of interest rates. With excess capacity expected to be absorbed slowly over the next several years, the Bank of Canada is likely to leave rates at their current 1.00% level until early 2019. Even as rates move higher, they are likely to rise to just 1.25% by the end of the forecast horizon in 2020.”

The change of the mortgage rates is closely associated with the overnight rate. Stable mortgage rates are quite different, as it is affected by bond yields. The forecast made by TD says the five-year government bond yield will increase at a steady pace at first. The ending of the five-year yield closed out last year at 0.73% and meant to be at 0% by the end of this year. Nonetheless, it will slowly experience insignificant upticks yearly.

 As predicted by the bank, by the end of next year, the percentage of the five-year bond will be at 0.95%, 1.30% at the end of 2018, and 1.55% in the year 2019 and finally at 1.80% by 2020. The rates rely on few economic influences. The economy is anticipated to increase by a slight 1.1% this year, and by 1.8% in the year 2017, due to the innovative determinations, as a result of the wildfire that occurred in Alberta earlier this year.