The Bank of Canada announced today that they will not be increasing their overnight rate which means that the prime interest rate for mortgages will not increase. They have held the overnight rate at 5%. This is great news for those of us with variable/adjustable rate mortgages!
The Bank of Canada has decided to maintain its target for the overnight rate at 5%. This decision comes as the bank closely monitors the ongoing effects of previous rate hikes on excess demand.
In a statement released this morning, the Bank acknowledged that inflation in advanced economies is showing signs of decline. However, because core inflation metrics remain elevated, major central banks will remain focused on achieving price stability.
In Canada, CPI inflation moved to 3.3% in July, up from 2.8% in June. The Bank expects inflation to be higher in the near term, especially considering recent spikes in gasoline prices, before eventually easing.
The Canadian economy experienced a contraction of 0.2% in the second quarter of 2023, as reported in a recent analysis. This decline was primarily attributed to a slowdown in consumption growth and a reduction in housing activity. Furthermore, it is important to note the impact of devastating wildfires in various regions across Canada 🌲🔥
The Bank of Canada continues to closely assess and respond to the evolving economic landscape, with the ultimate goal of fostering sustainable growth and stability for our nation. They remain committed to maintaining an inflation target of 2%, while supporting the recovery and enhancing the resilience of our economy
The Bank of Canada also said that global slowdowns in China, alongside signs of easing in the Canadian jobs market, were among the factors supporting a hold.
The rapid rate hike campaign since March 2022 has tried to cool the economy and discourage spending in an effort to rein in rampant inflation. Canada is not the only country sharing this cause, it is shared by many central banks around the world.
The Bank of Canada remains unwavering in its commitment to restoring price stability and is prepared to raise rates further if necessary. This is due to concerns about underlying inflationary pressures.
The Bank is set to next evaluate the overnight rate target on October 25, 2023. An increase of 0.25% to the prime interest rate is equivalent to roughly $23 for every $100,000 in mortgage. Stay tuned for further updates as we navigate these economic challenges together!