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 announced that there will be no change to its benchmark lending rate this morning. The rate currently sits at the effective lower bound of 0.25 percent, and is expected to remain there until the second half of 2022. The bank continues to spend a minimum of $3 billion per week through its quantitative easing (QE) program.
What Information did the Bank Share about the Economy?
- Global economic activity is beginning to rise again, with COVID-19 cases decreasing in many countries.
- Commodity prices, including oil, have increased even further and the Canadian dollar has further appreciated.
- GDP growth in the first quarter was reported as 5.6 per cent, slightly lower than what the Bank of Canada had originally projected.
- Lockdowns induced by the third wave of COVID-19 have decreased economic activity in the second quarter. Jobs that included workers in contact-sensitive areas were affected the most.
- Consumer spending is projected to elevate the Canadian economy as more Canadians become vaccinated and lockdown restrictions ease.
- Activity across the housing market is expected to cool down slightly, but remain elevated across the country.
- The bank predicts a recovery in exports and business investment due to strong growth in foreign demand and high commodity prices.
- Due to “base-year effects and stronger gasoline prices”, CPI inflation has risen to the top of the 1-3 percent inflation-control range but is expected to decrease in late 2021.
- Temporary factors have caused core measures of inflation to increase slightly.
Will there be any Interest Rate Changes in the Near Future?
The next rate announcement will take place on July 14, 2021 with no change expected at that time. As noted above, the latest projections by the Bank of Canada hold the rate at 0.25 percent until the latter half of 2022. The next Monetary Policy Report (MPR) will be released alongside the rate announcement on July 14.
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? Leave a comment below or contact our office and speak to one of our Mortgage Brokers today!