The Bank of Canada (BoC) is holding its key interest rate at 5%, with the bank rate at 5.25% and the deposit rate at 5%.
This is the third consecutive rate hold of the year and the BoC’s seventh rate announcement.
In 2022, the BoC hiked its interest rate seven times. Then, 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 brought the key rate to 5%, with the bank rate at 5.25%, and on September 12, it announced that it was holding those rates.
“In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures,” the BoC stated in an update on Wednesday morning.
It shared that consumption has been subdued, with softer demand for housing, durable goods and many services, while weaker demand and higher borrowing costs are weighing on business investment.
“Overall, a range of indicators suggest that supply and demand in the economy are now approaching balance,” the bank concluded.
Last week, Ratehub.ca co-CEO and president of CanWise mortgage lender James Laird told Daily Hive it was “widely expected” that the Bank would announce a rate hold today.
“It is possible that there will be no further rate hikes in 2023,” Laird said.
He believes the Bank hopes to be finished with rate hikes and will be unless it is “surprised by future incoming data.”
“Forecasting has been notably difficult for the Bank over the last 12 months, given there is still a lot of volatility in the economy,” he added.
What should you do?
With another rate hold now in place, Laird says anyone with a variable-rate mortgage or home equity line of credit (HELOC) should be “cautiously optimistic” that there will be no further rate hikes this year.
If you’re choosing between a fixed rate and a variable rate right now, you should only consider a variable rate if you’re open to more risk and are convinced that the Bank is finished or close to finished hiking rates, he advised.
One more interest rate announcement will follow this year on December 6.
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