Bank of Canada holds key interest rate at 5% in third update of 2024
The Bank of Canada (BoC) issued its third interest rate update of the year on Wednesday, April 10.
Like in January and March, Canada’s central bank kept the key interest rate at 5%.
Bank of Canada maintains policy rate, continues quantitative tighteninghttps://t.co/m4DvdKKGjk#economy #cdnecon
— Bank of Canada (@bankofcanada) April 10, 2024
The Bank said it has revised its forecast for global GDP growth to 2.75% in 2024 and about 3% in 2025 and 2026.
It added that inflation continues to slow across most advanced economies, although progress “will likely be bumpy.”
“Inflation rates are projected to reach central bank targets in 2025,” reads a release.
“The CPI inflation slowed to 2.8% in February, with easing in price pressures becoming more broad-based across goods and services. However, shelter price inflation is still very elevated, driven by growth in rent and mortgage interest costs.”
Canadians saw seven interest rate hikes in 2022. In January 2023, another increase followed, bringing the key rate to 4.5%.
The Bank held its key rate at 4.5%—precisely as experts predicted—until June 7, when it was raised to 4.75%. On July 12, the BoC raised the key rate to 5%, with the bank rate at 5.25%, and on September 6, it announced that it was holding those rates.
This year’s rate holds, including the one today, came after three consecutive ones in 2023.
In a report published in January, Oxford Economics researchers said they believe the 5% key rate will be held until mid-2024 when the BoC will trigger a cycle that lowers the rate.
With this in mind, industry experts were sure another rate hold was coming.
Ratehub.ca Co-CEO and president of CanWise mortgage lender James Laird shared his thoughts with Daily Hive earlier this month.
This year, much of Laird’s forecasts have focused on BoC commentary rather than interest rate numbers, which he did not expect to change today.
In an email, Laird said analyzing the Bank’s accompanying statements is key to determining whether rate cuts are on the near-term or long-term horizon or whether the Bank will continue keeping its cards close to its chest.
He advises anyone with a variable-rate mortgage or home equity line of credit (HELOC) to, once again, study the Bank’s statement for any indication of when they might see rate relief.
“Economic growth is forecast to pick up in 2024. This largely reflects both strong population growth and a recovery in spending by households. Residential investment is strengthening, responding to continued robust demand for housing,” today’s statement reads.
“The contribution to growth from spending by governments has also increased. Business investment is projected to recover gradually after considerable weakness in the second half of last year. The Bank expects exports to continue to grow solidly through 2024.”
Read the Bank’s statement in full here.
The next overnight rate announcement is scheduled for June 5, 2024.
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