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?
The Bank of Canada opted to decrease its policy interest rate by 0.25 percent today. Down to 4.75 percent, the central bank’s move was widely expected and can be attributed to a sustained downward shift in underlying inflation.
What Information did the Bank Share about the Economy?
Canadian Economy
- Canadian GDP in quarter one of 2024 was 1.7 percent, coming in below the bank’s expectations due to weak inventory investment.
- CPI inflation slowed to 2.7 percent in April 2024, with most measures trending down. The cost of housing still remains elevated.
- Housing activity, business investment, and consumption all saw increases through the first quarter.
- Wage pressures persist, but have seen some downward momentum in recent months.
- The Canadian economy continues to operate in excess supply.
Global Economy
- Globally, the economy grew by approximately 3 percent in quarter one of 2024.
- The US saw weaker exports and inventories throughout the first quarter, contributing to slow economic growth.
- Oil prices remain close to the bank’s projections in April’s Monetary Policy Report (MPR).
- The downward trend in inflation persists across most advanced economies, however price stability is uneven across regions.
How does this Impact Me?
- For Canadians with variable-rate mortgages, lines of credit, or other loans linked to the prime rate, your payment will decrease as a result of today’s announcement.
- Canadian economists continue to predict further decreases to the overnight lending rate in 2024 and 2025, directly affecting the prime rate offered by lenders.
Will there be any Interest Rate Changes in the Near Future?
The Bank of Canada’s next rate announcement will take place on July 24 2024, along with the release of the next Monetary Policy Report (MPR). The central bank will continue to monitor the risks to inflation in determining the timing of the next rate decrease, widely expected to occur in 2024. Governing Council remains particularly focused on economic supply and demand, inflation expectations, wage growth, and corporate pricing.
