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%.
In an update on Wednesday morning, the BoC said that though inflation in advanced economies has continued to come down, measures of core inflation are still elevated.
Canadaâs economy has entered a period of weaker growth, which is needed to relieve price pressures, according to the Bank of Canada.
Bank of Canada maintains policy rate, continues quantitative tighteninghttps://t.co/qJn6I1lnp1#economy #cdnecon
â Bank of Canada (@bankofcanada) September 6, 2023
“This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country,” reads the update.
“Household credit growth slowed as the impact of higher rates restrained spending among a wider range of borrowers.”
The Bank of Canada added that although recent evidence shows that excess demand in the economy is easing, it remains concerned about the persistent pressures of underlying inflation.
“We will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the 2% inflation target,” reads the update. “The Bank remains resolute in its commitment to restoring price stability for Canadians.”
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.
âThe Bank chose to raise at the last two announcements, so a raise is certainly still on the table,â he said. âBorrowers should be budgeting for a rate hike so that they are prepared if it does happen.â
Laird advises those shopping for a fixed-rate mortgage to submit a rate hold before the announcement because, depending on whatâs to come, bond yields could push up further, which will cause fixed rates to follow.
âAnyone with a variable rate or a home equity line of credit (HELOC) will be hoping for a hold next week and guidance that further rate hikes are unlikely,â shared Laird.
âIf rates go up further, it will put downward pressure on home values, which have plateaued over the summer. On the other hand, if the Bank chooses to hold, it could cause buyers to come off the sidelines, thereby increasing demand,â he added.
Today’s announcement marks the Bank’s fifth rate hike since January 2023. The next scheduled date for announcing the overnight rate target is October 25, 2023.
One more interest rate announcement will follow this year on December 6.
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