What Does the Bank of Canada do?
Eight times per year, the Bank of Canada (BOC) makes a scheduled announcement about their benchmark lending rate based on data they have assessed about the current state of the Canadian economy. Any change to this rate indicates a possible change to corresponding rates, such as interest rates for mortgages and additional types of consumer loans. This is because the rate set by the bank will directly affect prime rates offered by banks and other financial lenders. For more information, take a look at our blog post breaking down four of the most frequently asked questions regarding the BOC.
Were there any Changes to the Interest Rate?
With indications that monetary policy is working as intended, the Bank of Canada decided to maintain its overnight lending rate at 5 percent today. The central bank has also confirmed that its quantitative tightening policy will remain in place.
What Information did the Bank Share about the Economy?
Canadian Economy
- Canada’s GDP diminished by 1.1 percent in quarter-three, with relatively high interest rates restricting consumer spending.
- Job creation remains slower than growth in the labour force, and there are fewer job vacancies throughout the country.
- Despite these trends, wage growth continues to rise between 4 and 5 percent.
- Shelter price inflation has increased as a result of the recent growth in rent and housing costs.
- However, overall CPI inflation decreased to 3.1 percent in October due to a recent drop in gasoline prices and reduced inflationary pressures on some goods and services.
- Core measures of inflation are currently sitting between 3.5 to 4 percent.
- Recent data suggest that the Canadian economy is no longer experiencing excess demand.
Global Economy
- On a global scale, the economy is persistently decelerating, and inflation has alleviated further.
- Recent growth growth in the United States has exceeded expectations, but it is anticipated to diminish in the upcoming months as the impacts of previous policy rate increases gradually affect the economy.
- The value of the US dollar has declined relative to most currencies, including Canada’s.
- Oil prices are currently nearing $10-per-barrel lower than what was projected in the October Monetary Policy Report (MPR).
How does this Impact Me?
- Variable rate mortgage holders will not see an increase in their interest rate as a result of today’s announcement.
- Some economists are predicting decreases to the overnight lending rate by the end of 2024. This would result in a subsequent decrease to variable mortgage rates.
- The recent decrease in bond yields could see fixed interest rates decline further in the coming months.
Will there be any Interest Rate Changes in the Near Future?
The next rate announcement will be on January 24, 2024. Although the bank has expressed ongoing concern about inflationary risks, no change is expected at that time.
