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 the Bank of Canada announced its second rate increase of 2023 and the overnight lending rate has moved to 4.75%. The Governing Council made the decision to increase the interest rate 25 basis points mainly due to CPI inflation seeing an uptick to 4.4% in April. Persistent excess demand continues to pressure prices upward. Canadians have not seen this key interest rate since April of 2001.
What Information did the Bank Share about the Economy?
- Globally underlying inflation remains high even with consumer price inflation slowly coming down. Many central banks are considering further interest rate hikes to bring price stability back.
- Canada’s economy had surprising GDP growth of 3.1%. An increase to spending on interest sensitive goods, more activity in the housing market and a demand for services all contributed to this result.
- There is continued demand for labour in the tightened labour market even with higher immigration expanding the volume of workers.
- While the bank is still projecting inflation to decrease to 3% by summer, there are concerns rising that inflation will get stuck above the 2% mark.
How does this Impact Me?
- Variable rate mortgage holders will see an increase on their next scheduled mortgage payment.
- Economists are considering the recent data indicates more rate increases could be necessary to restore inflation back to the two percent target. If you are struggling with your variable rate mortgage, reach out to one of our brokers about your options.
Will there be any Interest Rate Changes in the Near Future?
The next rate announcement will be on July 12, 2023. The Bank will also publish the Monetary Policy Report at that time, which includes a full outlook for the economy and inflation.
How Can I Learn More?
For up-to-date information on interest rates and other important mortgage news that may impact you, you can follow us on Facebook, Instagram or LinkedIn. Questions about today’s announcement? Contact our office and speak to one of our Mortgage Brokers today!
