A rate cut finally coming? What to expect from this week's Bank of Canada update
The Bank of Canada (BoC) will issue its fourth interest rate update of the year on the morning of Wednesday, June 5.
Canada’s central bank kept the key interest rate at 5% in January, March, and April.
In its last update, the BoC said it had revised its forecast for global GDP growth to 2.75% in 2024 and about 3% in 2025 and 2026.
Officials 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,” a release about the last update on April 10 reads.
“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. Another increase followed in January 2023, bringing the key rate to 4.5%.
The BoC 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 three rate holds 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 it.
With this in mind, industry experts are almost sure another rate hold is coming.
Ratehub.ca Co-CEO and president of CanWise mortgage lender James Laird shared his thoughts with Daily Hive on Tuesday.
So far, Laird has correctly predicted all three rate holds for the year. He’d suggested that those following the BoC’s announcements focus more on its commentary.
However, he believes things may be changing now.
“This is a big announcement because there is a chance that we get the first rate cut since March 2020,” Laird said in an email. “Experts are split on whether we will see our first rate cut in over four years next week. Those who don’t think the Bank will cut next week think it will happen in the July announcement.”
What should homeowners do depending on the BoC interest rate announcement?
“If we do get our first rate cut next week, it will be interesting to see if heat returns to the real estate market across the country or perhaps a quarter-point cut will not be enough to fuel the fire,” stated Laird.
He shared that with most real estate markets balanced and some in buyers’ markets, Canadians shopping for a home should decide whether to try to find something ahead of the first potential rate cut of 2024.
“Anyone with a variable-rate mortgage or home equity line of credit (HELOC) will be watching this announcement closely to see if they can finally get some rate relief,” the CEO said.
He added that fixed rates will likely remain unchanged regardless of BoC cuts since rate cuts are already priced into the current bond market.
Follow Channels and Categories