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?
Today is the last Bank of Canada announcement of 2022. The overnight lending rate has increased to 4.25 percent, up from 3.75 percent since October 2022. The Bank of Canada is continuing its quantitative tightening (QT) policy that began at the end of April.
What Information did the Bank Share about the Economy?
- While it appears to be more resilient than predicted in October, global economic growth is beginning to slow. Additionally, worldwide inflation remains elevated.
- Global supply bottlenecks are beginning to ease, but geopolitical events threaten any further progress.
- Canada experienced higher than expected GDP growth in the third quarter while the economy continued to operate in excess demand
- Inflation and short-term inflation expectations remain too high, although there are some early indicators that price pressures may be losing momentum.
- Canadians are seeing the price of many of their regular purchases increase. CPI inflation remained at 6.9% in October and measures of core inflation remained around 5%.
How does this Impact Me?
- Variable rate mortgage holders can expect an immediate increase to the prime rate offered by your lender. Depending on your mortgage, this may increase your mortgage payments or decrease the amount of your payment that goes toward the principal balance of your mortgage.
- Commodity exports have strengthened, but domestic demand seems to be constrained. This is evident from the continued decline in the housing market and slowed consumption in this third quarter.
- Unemployment in Canada is nearing historic lows as labour markets remain tight.
Will there be any Interest Rate Changes in the Near Future?
The next rate announcement will be in the new year on January 25, 2023. Until that time, the Governing Council will assess whether there needs to be further increases in the policy interest rate. The decision will be based on the need to bring supply and demand back into balance as well as bring inflation back down to its target. The Governing Council will continue to monitor the effects of tighter monetary policies on supply and demand, as well as inflation and inflation expectations. The Bank remains committed to achieving its 2% inflation target and ensuring Canadians see a return to price stability.