What to expect from the next Bank of Canada interest rate announcement

Oasishifi/Shutterstock

The Bank of Canada (BoC) is set to issue the final interest rate update of the year next month.

The announcement will come on Wednesday, December 6 at 10 am ET, marking the eighth interest rate announcement this year.

Canada’s central bank held the key interest rate at 5% in the last update in October.

It was the third consecutive rate hold of the year, after Canadians saw seven interest rate hikes in 2022. In January 2023, another increase followed, bringing the key rate to 4.5%.

Our target for the overnight rate is the tool we use to manage inflation. 🎯

Check out this explainer on how it influences various interest rates in the economy that impact Canadians.https://t.co/6PcWSMnhVJ #cdnecon #economy

— Bank of Canada (@bankofcanada) November 27, 2023

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 brought the key rate to 5%, with the bank rate at 5.25%, and on September 6, it announced that it was holding those rates.

Ratehub.ca co-CEO and president of CanWise mortgage lender James Laird shared his thoughts and expectations for the upcoming BoC announcement with Daily Hive.

“It seems certain that the Bank of Canada will hold the key overnight rate next week,” he said in an email.

“While the Bank continues to keep the possibility of further rate hikes on the table, recent commentary suggests rate hikes are likely over as long as inflation continues to trend in the right direction.”

Laird says that assuming the hikes are over, the question now is if and when interest rate cuts will happen.

What should homeowners do depending on the interest rate announcement?

When it comes to mortgage rates and housing, Laird says anticipation of potential rate cuts is driving down bond yields.

He says this has “caused fixed rates to come down” since the last BoC update.

Laird adds that anyone with a variable-rate mortgage or home equity line of credit will be keeping an eye on when the bank might cut rates next year.

“Anyone choosing between a fixed and variable rate at the moment would only consider a variable rate if they are open to more risk and have conviction that the Bank is finished or close to finished hiking rates,” he said.

“Higher rates are finally biting the housing market, with prices and sales down in most communities.”

You might also like: