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 overnight lending rate set by the Bank of Canada was expectedly held steady today at 0.25 percent. Current projections for future rate changes remain in line with July, with no change anticipated until the latter half of 2022. Mortgage interest rates are also likely to remain unchanged as a result of this announcement. The bank’s Quantitative Easing (QE) program continues at a minimum $2 billion spend per week.
What Information did the Bank Share about the Economy?
- Economic recovery on a global scale was strong throughout the second quarter and into quarter three. However, the recent spike in COVID-19 cases as well as supply chain disruptions in several sectors may slow down recovery as quarter three comes to a close.
- Canadian GDP shrunk by one percent in the second quarter, largely due to the aforementioned supply chain disruptions (particularly in the auto sector).
- Activity in the housing market has also slowed its pace.
- The bank reports that domestic demand is currently growing at more than three percent, with “consumption, business investment, and government spending” supporting growth.
- Employment has also seen some gains after the easing of health restrictions across the country in June and July. Low-wage workers continue to be affected disproportionately.
- Despite entering the fourth wave of COVID-19, the Canadian economy is still expected to strengthen over the latter half of 2021.
- CPI inflation continues to remain above three percent due to temporary factors such as gasoline prices, supply chain issues due to the pandemic, and base-year effects.
- The bank is carefully evaluating the situation on a regular basis, as uncertainty remains about the duration and significance of these temporary factors
Will there be any Interest Rate Changes in the Near Future?
The next rate announcement and Monetary Policy Report will be published on October 27, 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 Bank of Canada continues to closely monitor the measures necessary to sustainably achieve the 2 percent inflation target, and will adjust monetary support as required.
How Can I Learn More?
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