In this blog:
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 an additional decrease to the overnight lending rate today. Now sitting at 4.25 percent, this is the third time in a row Canada’s central bank has opted to decrease its key interest rate. The bank is also continuing its balance sheet normalization policy, which aims to create a more stable and sustainable fiscal environment by reducing financial risks and improving the government’s ability to respond to economic challenges.
What Information did the Bank Share about the Economy?
Canadian Economy
- The Canadian dollar has seen slight appreciation in recent months, while oil prices are lower than the projected in July’s Monetary Policy Report (MPR).
- The economy expanded by 2.1 percent in the second quarter of this year, bolstered by government spending and business investment.
- Wage growth remains high while the labour market continues to slow.
- Inflation eased to 2.5 percent in July, as excess supply helped reduce price levels despite elevated shelter costs exerting upward pressure. The bank is monitoring these opposing forces closely in determining the timing of future rate cuts.
- Shelter price inflation (which includes rent and mortgage interest costs) continues to have the largest impact on overall inflation; however, it is showing signs of easing in coming months.
Global Economy
- In line with forecasts in July’s MPR, the global economy grew by approximately 2.5 percent in quarter two of 2024.
- Second quarter growth in the US was more robust than expected.
- Financial conditions have softened on a global scale and bond yields have decreased.
How does this Impact Me?
- Payments will decrease for Canadians with variable-rate mortgages, lines of credit, or other loans linked to the prime rate due to today’s announcement.
- 5-year fixed rates generally decrease as a result of sustained declines in bond yields.
Will there be any Interest Rate Changes in the Near Future?
The Bank of Canada’s next rate announcement will take place on October 23, 2024, with a high likelihood of an additional decrease by the end of 2024.
