The Bank of Canada maintains interest rate policy to end 2025
The Bank of Canada announced today that it is keeping its benchmark interest rate at 2.25%. This hold-the-line approach reflects the Bank’s expert interpretation of macroeconomic data.
We summarize the Bank’s observations and its outlook below.
Know this, fixed rates are trending up due to multiple factors, but mostly long term government debts, especially in the USA.
Now is a great time to buy while prices are soft, there are lots of listings, and rates are around the 4% mark
Mortgage Mark Herman, MBA; 1st time home buying specialist, and move-up mortgage broker
Canadian Economic Performance and Near-Term Outlook
- The Canadian economy grew by a “surprisingly” strong 2.6% in the third quarter, even as final domestic demand was flat
- The BoC notes that the increase in GDP largely reflected volatility in trade
- The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be “weak”
- Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility
Canadian Labor Market
- Canada’s labour market is showing “some signs” of improvement
- Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November
- Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued
Canadian Inflation and Outlook
- Inflation measured by the Consumer Price Index (CPI) slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly
- CPI inflation has been close to the Bank’s 2% target for more than a year, while measures of core inflation remain in the range of 2.5% to 3%
- The Bank assesses that underlying inflation is still around 2.5%
- In the near term, CPI inflation is likely to be higher due to the effects of last year’s GST/HST holiday on the prices of some goods and services
- Looking through this “choppiness,” the Bank expects ongoing economic slack to roughly offset cost pressures associated with the “reconfiguration” of trade, keeping CPI inflation close to the 2% target
Global Economic Performance
- Major economies around the world continue to show resilience to US trade protectionism, but uncertainty is still high
- In the United States, economic growth is being supported by strong consumption and a surge in AI investment
- The US government shutdown caused volatility in quarterly growth and delayed the release of some key economic data
- Tariffs are causing some upward pressure on US inflation
- In the euro area, economic growth has been stronger than expected, with the services sector showing particular resilience
- In China, soft domestic demand, including more weakness in the housing market, is weighing on growth
- Global financial conditions, oil prices, and the Canadian dollar are all “roughly unchanged” since the Bank’s Monetary Policy Report in October
Outlook
The Bank offers that if inflation and economic activity evolve broadly in line with its October projection, it sees its current policy interest rate “at about the right level” to keep inflation close to 2% while helping the economy through this period of structural adjustment.
However, the Bank also says that if uncertainty remains elevated and its outlook changes, “we are prepared to respond.”
New Housing Rules for 1st First-Time Buyers and New Builds
If you’re a first-time home buyer or looking to purchase a new build, this affects you.
Here’s a quick summary of the changes coming in December 2024:
What’s New?
30-Year Amortizations Now Available for First-Time Buyers and New Build Purchases
- First-time home buyers can now access 30-year amortizations for insured mortgages.
- This increases the amount you qualify for by about 9% or lowers your monthly payment about the same.
- 30-Year Amortization for New Builds – Technically, this took effect on August 1, 2024, and is available to everyone, not just First-Time Homebuyers.
Price Cap Increase for Insured Mortgages
- The price cap (purchase price) for insured mortgages has been raised from $999,999 to $1,499,999 million.
- EG: if you were to purchase a home today priced at $1.1 million, your minimum down payment to qualify for a mortgage would be 20% or $220,000. After December 15th, the minimum down payment required decreases to $85,000.
- If that $1.1 million dollar home also has a self contained suite, you can use the rent or “potential” rent that suite will generate to help qualify for a bit more of a mortgage too.
The Fine Print
Down payment – Great news, minimum requirements stay the same:
- 5% on the portion up to $500,000
- 10% on the portion between $500,000 and $1.5 million
* Previously, the down payment on a $1.5 million home for a First-Time Home buyer was $300,000.
FTHB’s can now get into that same home with $125,000.
This will undoubtedly take some pressure off the Bank of Mom and Dad.
Effective Date
These changes will apply to mortgage insurance applications submitted on or after December 15, 2024. The key word here is ‘submitted.’ Your offer will need to be timed just right if you wish to take advantage of the new 30-year amortization.
Potential Impacts on the Housing Market:
We are in an interesting position right now. On one hand, lenders are competing for new business in what could be described as a ‘rate war.’
Additionally, with First-Time Home Buyers (FTHB) set to qualify for 30-year amortizations after December 15th, we can expect an uptick in demand.
Historically, higher demand leads to higher prices and rate decreases cause an equal and opposite increase in home prices.
Buy or Sell – Now or Later?
While there’s no crystal ball, consider these possibilities:
- Buy Now: Prices are expected to rise once the new rules take effect, so purchasing before December could mean less competition and potentially lower prices.
- Sell Later: If your home is priced between $1 million and $1.5 million, waiting until after December 15th could attract more qualified buyers and possibly higher offers.
More details will emerge as lenders and insurers prepare to offer the new 30-year amortization, such as how lenders will view the minimum down payment.
If you want to discuss how these changes might impact your plans to buy or sell, feel free to reach out!
Variable Rate Beats BOTH 3-year & 5-year Fixed Terms
The Variable is the best way to go right now and this blue link has all the details in PDF: VARIABLE RATE beats both 3-year fixed & 5-year fixed terms
Data point 1: Variable rates should be coming down 2% in the next 13.5 months, with a “jumbo reduction” of 0.5% (1/2%) expected on Wednesday, Oct 23rd – by 5 of the 6 Big Banks.
Data point 2: Historically, fixed rates only go down about 40% of the reductions to Prime, so fixed rates will not be going down anywhere near as much or as fast as the Variable.
Data point 3: Just a 1% rate reduction is expected to “reactivate” at least half of buyers who previously stopped shopping due to “buyer fatigue.”
Data point 4: As interest rates come down, prices INCREASE because most buyer’s need to go to their max mortgage when buying.
Graphic details of expected rate reductions and the dates of expected changes, in PDF: VARIABLE RATE beats both 3-year fixed & 5-year fixed terms
Our favorite customer quote so far in October:
I am not locking in 3-year money nor 5-year money today, when the Bank of Canada has made it clear rates are coming down 2% in the next 15 months.
Mortgage Mark Herman, Top Calgary Alberta Mortgage Broker near me.
Prime to be 2% LOWER in 15 months, Dates of drops, Variable rate wins: Fall 2024
Yes, with the writing on the wall for the coming Prime rate decreases the Variable rate is the way to go.
Variable rates are based on Consumer Prime, which moves the exact same as the Bank of Canada’s “overnight rate.” The decreases in the overnight rate will be the same for Consumer Prime and they are below.
So Sept 4, 2024, Prime will go from 6.7% to 6.45%
Canadian Consumer Prime – what Variable Rates are based on – will be these rates here.
If your “discount is Prime – 0.95%” then your rate would be this number below – 0.95%. And as you can see, this is way better than the 3-year fixed at 4.84% or the 5- year fixed at 4.69% today.
- September 4, 2024: 6.45%
- October 23, 2024: 6.20%
- December 11, 2024: 5.95%
- January 2025: 5.70%
- March 2025: 5.45%
- April 2025: 5.20%
- June 2025: 4.95%
- September 2025: 4.70%
- October 2025: 4.45%
- December 2025: 4.20%
Article is here: Bank of Canada’s policy interest rate could dip to 2.75% by late 2025:
forecast:: https://dailyhive.com/vancouver/bank-of-canada-policy-interest-rate-forecast-2025-credit-1
Predictions of the article for the rate drops: Credit 1’s Bank of Canada policy interest rate forecast, as updated on August 26, 2024:
-
- September 4, 2024: 4.25%
- October 23, 2024: 4.0%
- December 11, 2024: 3.75%
- January 2025: 3.5%
- March 2025: 3.5%
- April 2025: 3.25%
- June 2025: 3.25%
- September 2025: 3.0%
- October 2025: 2.75%
- December 2025: 2.75%
Prime now 6.95% from 7.20%: BoC reduces its benchmark interest rate to 4.75%
Today, the Bank of Canada reduced its overnight policy interest rate by 0.25% to 4.75%. This welcome and widely expected decision comes on the heels of evidence pointing to a deceleration of the rate of inflation.
SUMMARY:
The “overnight rate” being quoted is the rate that Banks borrow from each other at, not consumer Prime, which is confusing.
Canadian Consumer Prime has just been reduced from 7.20% to 6.95% – this only affects Variable Rate mortgages.
Fixed rates remain unchanged because they track the Canadian Mortgage Bond Rates which are different, and similar.
There has also been about 40 “silent” fixed rate reductions of o.o5% each in 2024 that the press did not cover.
Mortgage Mark Herman, Top best Calgary Alberta mortgage broker specializing in 1st time buyers
Below we examine the Bank’s rationale for this move by summarizing its observations below, including its all-important outlook comments that are sure to shape market expectations for the remainder of the year.
Canadian inflation
- Inflation measured by the Consumer Price Index (CPI) eased further in April to 2.7%
- The Bank’s preferred measures of core inflation also slowed and three-month indicators suggest continued downward momentum
- Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average, however, shelter price inflation remains high
Canadian economic performance and housing
- Economic growth resumed in the first quarter of 2024 after stalling in the second half of last year
- At 1.7%, first-quarter GDP growth was slower than the Bank previously forecast with weaker inventory investment dampening activity
- Consumption growth was solid at about 3%, and business investment and housing activity also increased
- Labour market data show Canadian businesses continue to hire, although employment has been growing at a slower pace than the working-age population
- Wage pressures remain but look to be moderating gradually
- Overall, recent data suggest the economy is still operating in excess supply
Global economic performance and bond yields
- The global economy grew by about 3% in the first quarter of 2024, broadly in line with the Bank’s April Monetary Policy Report projection
- The U.S. economy expanded more slowly than was expected, as weakness in exports and inventories weighed on activity
- In the euro area, activity picked up in the first quarter of 2024 while China’s economy was also stronger in the first quarter, buoyed by exports and industrial production, although domestic demand remained weak
- Inflation in most advanced economies continues to ease, although progress towards price stability is “bumpy” and is proceeding at different speeds across regions
- Oil prices have averaged close to the Bank’s assumptions, and financial conditions are little changed since April
Summary comments and outlook
The Bank cited continued evidence that underlying inflation is easing for its decision to change its policy interest rate. More specifically, it said that “monetary policy no longer needs to be as restrictive.”
Also welcome was the Bank’s statement that “recent data” have “increased our confidence that inflation will continue to move towards” its 2% target.
However, it also added this to its outlook: “Nonetheless, risks to the inflation outlook remain. Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.”
And has it has been doing for some time, it said the Bank “remains resolute in its commitment to restoring price stability for Canadians.”
Next up
The Bank returns on July 24th with its next monetary policy announcement – I think they will do another 0.25% reduction at the next meeting and they will continue to reduce at every meeting for the next 3 meetings this year.
When Will Canadian Mortgage Rates Begin to Fall?
Last week, the Bank of Canada held its policy rate at 5%. The decision was expected given slowing in the economy and modest improvement to core inflation measures.
The Bank is likely at the end of its tightening cycle. How soon it eases rates – and how low will rates go in the near to medium term – is the question #1
ANSWER: The general view from market economists is that we could see some easing of the overnight rate by mid-2024.
Question #2: How low. how far will Prime come down?
ANSWER: Prime is expected to come down a total of 2%.
DETAILS of Prime Cuts
- Prime is 7.2% now / November 2nd, 2023,
- Prime is expected to get down to to 5.2% or a bit lower, like 4.75% – 5.25% range by the end 2025; which looks like this:
- June/ July 2024, 1st Prime cuts = 6 months
- Prime reduction by o.25% every quarter = 1% less / year for the next 2 years = 24 months
- so these together = 30 months.
With Prime coming down, now is the time for you to take advantage of the Variable Rate reductions.
Variable Rates via brokers are at Prime – o.9%, while the Big-6 banks rates are Prime – o.15%.
YES, broker rates are 6x better than at the Big-6 lenders, o.9 – o.15 = o.75% better. It’s true!
Mortgage Mark Herman; Best Top Calgary Mortgage Broker for first time home buyers.
When might rates begin to fall?
The Bank’s latest Monetary Policy Report (MPR) also provides signals that we can monitor to gauge when rates could start declining.
When interest rates rise, one of the main ways monetary policy affects the economy is through reduced consumer spending on durable goods, like appliances, furniture and cars. Prices for durable goods, except for cars, have dropped from 5.4% to -0.4%, while prices for semi-durable goods, like food and clothing, have decreased from 4.3% to 2.1%. We’re still experiencing delays in delivering cars. As a result, manufacturers are concentrating on selling more expensive vehicles with higher margins and are offering fewer discounts from list prices.
Inflation in service prices, excluding shelter, has slowed from 5.1% to 1.5%. If bond rates begin to drop, we will see a gradual decline in mortgage costs. The challenge will be rental costs, which are soaring due to the very limited availability of rentals and the continuous influx of newcomers. Increasing housing supply is key to reducing rental prices. However, that is a problem that will take years to resolve given the significant shortage of housing.
Currently, the Bank is concerned about inflation expectations, corporate pricing behaviour, and wage growth. As noted in its Monetary Policy Report, “As excess demand eases, inflation is expected to slow. At the same time, inflation expectations should also fall, businesses’ pricing behaviour should normalize, and wage growth should moderate. So far, progress has occurred but somewhat more slowly than anticipated.”
The Bank will be careful to ensure that inflation expectations inconsistent with its 2% target are not embedded in corporate pricing and wage expectations. A slowing economy should help to lower those expectations.
The general view from market economists is that we could see some easing of the overnight rate by mid-2024.
NERD STUFF: Maintaining a restrictive rate policy
The Bank can maintain a restrictive policy even without increasing rates any further, simply by keeping rates at their current level. With the overnight rate at 5% and an inflation rate of 3.8%, the real policy rate is 1.2%. This rate is restrictive, since it is higher than the neutral real rate of interest, which the Bank estimates to be between 0 and 1%.
The neutral real rate of interest is the level of interest that neither stimulates nor restrains economic growth. In other words, it is the rate at which the economy is in balance, with stable prices and full employment. Therefore, when the real rate of interest is restrictive, we would expect GDP to slow.
In its recent Monetary Policy Report (MPR), the Bank is forecasting economic growth to average less than 1% over the next few quarters, while potential output growth is expected to average 2%, mainly due to population growth and increased labor productivity. This should lead to a negative output gap (low demand and a surplus of products) and lower inflation.
Canadian economy running too hot, BoC increases Prime by .25%
Hot Economic growth leads the Bank of Canada to increase its benchmark interest rate
Today, the Bank of Canada increased its overnight interest rate to 4.75% (+0.25% from April) because of higher-than-expected growth in Canada’s economy in the first quarter and the view that monetary policy was not yet restrictive enough to bring inflation down to target.
Leading up to today’s announcement, many economists feared that the BoC would have no choice but to raise rates in the face of persistent inflation and recent GDP growth. Their fears were founded.
To understand the Bank’s thinking on this important topic, we highlight its latest observations below:
Inflation facts and outlook
- In Canada, Consumer Price Index (CPI) inflation “ticked up in April” to 4.4%, the first increase in 10 months, with prices for a broad range of goods and services coming in higher than expected
- Goods price inflation increased, despite lower energy costs
- Services price inflation remained elevated, reflecting strong demand and a tight labour market
- The Bank continues to expect CPI inflation to ease to around 3% in the summer, as lower energy prices “feed through” and last year’s large price gains “fall out” of the yearly data
- However, with three-month measures of core inflation running in the 3.50%-4% range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the 2% target
Canadian housing and economic performance
- Canada’s economy was stronger than expected, with GDP growth of 3.1% in Q1 2023
- Consumption growth was “surprisingly strong and broad-based,” even after accounting for the boost from population gains
- Demand for services continued to rebound
- Spending on “interest-sensitive goods” increased and, more recently, “housing market activity has picked up”
- The labour market remains tight: higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour
- Overall, excess demand in the economy looks to be “more persistent” than anticipated
Global economic performance and outlook
- Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high
- While economic growth around the world is softening in the face of higher interest rates, major central banks are signalling that interest rates may have to rise further to restore price stability
- In the United States, the economy is slowing, although consumer spending remains surprisingly resilient and the labour market is still tight
- Economic growth has essentially stalled in Europe but upward pressure on core prices is persisting
- Growth in China is expected to slow after surging in the first quarter
- Financial conditions have tightened back to those seen before the bank failures in the United States and Switzerland
Summary and Outlook
The BoC said that based on the “accumulation of evidence,” its Governing Council decided to increase its policy interest rate, “reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the 2% target.”
The Bank says quantitative tightening is complementing the restrictive stance of monetary policy and normalizing the Bank’s balance sheet.
Going forward, the Bank said it will continue to assess the dynamics of core inflation and the outlook for CPI inflation with particular focus on “ evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving” its inflation target.
Once again, the Bank repeated its mantra that it “remains resolute in its commitment to restoring price stability for Canadians.”
Next up
With today’s announcement now behind us, a new round of speculation will begin in advance of the Bank’s next policy announcement on July 12th.
Odds of New Rates
Market odds now have a July 12 hike at a 61% probability, with potentially another increase by December.
Just 1 more Prime Rate increase would take the benchmark prime rate from 6.95% at the end of today to a nosebleed 7.20% (last seen in February 2001).
There may well be another Prime Rate increase on July. We have strategies to beat these rates so please call and we can sort out a situation that works for you.
Canadian Residential Mortgage Market: Inflation & Interest Rates: the Lead Characters for 2023
Summary:
- The Bank of Canada (BOC) increased interest rates 7 times in 2022. Exactly as expected 16 months ago.
- Inflation is at least 5.7%; and it needs to get down to 3%
- The BoC would rather over-tighten than under-tighten
- Normally it takes 18 to 24 months for interest rate increases to work their way into the economy and we are only about 10 months into this tightening cycle
These 4 painful data points mean Prime will increase from 6.45% to 6.70% on Jan 25th.
We now expect there to be at least 1 or 2 more o.25% increases to Prime before it is expected to hold for the rest of 2023, and then begin to decrease in 2024.
Mortgage Mark Herman, Top Calgary Alberta Mortgage Broker
DATA
A lot of the recent talk in financial and real estate circles has been centering on the possibility of a pause in the Bank of Canada’s aggressive interest rate increases. Some speculate that could happen at the next rate setting, later this month, on January 25th.
The Bank raised rates 7 times last year in an effort to rein-in galloping inflation. It does seem to be working, but there are some stubborn sticking points.
Headline inflation, known as the Consumer Price Index (CPI), has dropped. It was 8.1% in July and drifted down to 6.8% in November. However, the drop from October to November was a mere one-tenth of one percentage point and the Bank’s target rate remains significantly below that, at 2.0%.
As well, the BoC’s preferred inflation measure, Core Inflation (which strips out volatile components like food and fuel), actually increased. A simple averaging of the three components that the Bank uses to measure Core Inflation came in at nearly 5.7% in November, up from 5.3% in October.
Other factors that figure into the Bank’s plans include Gross Domestic Product and unemployment. Canada’s GDP continues to grow, albeit modestly, despite rising interest rates. It increased by 0.1%, month-over-month in November. Unemployment dipped 0.1% to 5.0% in December. Both of these tend to fuel higher wages which are a key driver of inflation.
The Bank of Canada, itself, remains firmly dedicated to battling back inflation. Governor Tiff Macklem has said he would rather over-tighten than under-tighten and run the risk of having high inflation linger and become entrenched.
The U.S. central bank has made it clear it plans more rate hikes. Given the integration of the Canadian and American economies, the Bank of Canada does have to pay attention to what its American counterpart does.
The BoC will have new economic data by the time it makes its January 25th announcement. The December numbers will provide a fresh look at how well the inflation fight is going.
Normally it takes 18 to 24 months for interest rate increases to work their way into the economy and we are only about 10 months into this tightening cycle. It is reasonable to expect another 25 basis-point increase on the 25th. Given the Bank’s apparent success so far it also seems reasonable to expect a pause sometime after that.
Looking ahead to a year from now some forecasters say we might start to hear talk of interest rate cuts, which would be welcome news. Cuts would allow the BoC to move toward its, long stated, goal of normalizing rates back into the neutral range of 2.5% to 3.5%. The Bank of Canada, and central banks around the world, have been trying to do that for more than a decade – since the ’08 – ’09 financial collapse.
Trigger Point for Canadian Variable Rate Mortgages Explained, with Example
You have likely heard – or will soon be hearing – a lot of talk about “trigger rates” and “trigger points”. More importantly, you are probably hearing “trigger point” together along with more changes in the Bank of Canada rate and you need expert guidance.
Let’s start with a few definitions:
- Variable Rate Mortgage (VRM) – prime changes, rate changes. When interest rates change, typically, your mortgage payment will stay the same.
- Adjustable Rate Mortgage (ARM) – prime changes, rate changes. Unlike variable rate, your mortgage payment will change when interest rates change.
- Trigger Rate – When interest rates increase to the point that regular principal and interest payments no longer cover the interest charged, interest is deferred, and the principal balance (total cost) can increase until it hits the trigger point.
- Trigger Point – When the outstanding principal amount (including any deferred interest) exceeds the original principal amount. The lender will notify the customer and inform them of how much the principal amount exceeds the excess amount (Trigger Point). The client then typically has 30 days to make a lumpsum payment; increase the amount of the principal and interest payment; or convert to a fixed rate term.
NOW, WHICH MORTGAGES WILL BE AFFECTED FIRST?
Quick answer, VRMs from March 2020 to March 2022.
During the month of March 2020, the prime rate dropped three times in quick succession from 3.95% to 2.45%, and variable-rate mortgages arranged while prime was 2.45% have the lowest payments. The lower the interest rate was, the lower the trigger rate, and the faster your client may hit this negative amortization.
WHAT TO DO
When this happens, customers are contacted by the lender and generally have three ways they can proceed:
- Make a lump-sum payment against the loan amount
- Convert with a new loan at a fixed-rate term
- Increase their monthly payment amount to pay off their outstanding principal balance within their remaining original amortization period
Below is a customer scenario so you can see how this could play out.
Data on July 1, 2022 Prime Increase to 3.7%
Today, the Bank of Canada showed once again that it is seriously concerned about inflation by raising its overnight benchmark rate to 1.50% – making Consumer Prime 3.70%
This latest 50 basis point increase follows a similar-sized move in April and is considered the fastest rate hike cycle in over two decades.
Everyone STAY COOL!
Says Mortgage Mark Herman, top Calgary Alberta Mortgage Broker.
With it, the Bank brings its policy rate closer to its pre-pandemic level.
In rationalizing its 3rd increase of 2022, the Bank cited several factors, most especially that “the risk of elevated inflation becoming entrenched has risen.” As a result, the BoC will use its monetary policy tools to return inflation to target and keep inflation expectations well anchored.
These are the highlights of today’s announcement.
Inflation at home and abroad
- Largely driven by higher prices for food and energy, the Bank noted that CPI inflation reached 6.8% for the month of April, well above its forecast and “will likely move even higher in the near term before beginning to ease”
- As “pervasive” input pressures feed through into consumer prices, inflation continues to broaden, with core measures of inflation ranging between 3.2% and 5.1%
- Almost 70% of CPI categories now show inflation above 3%
- The increase in global inflation is occurring as the global economy slows
- The Russian invasion of Ukraine, China’s COVID-related lockdowns, and ongoing supply disruptions are all weighing on activity and boosting inflation
- The war has increased uncertainty, is putting further upward pressure on prices for energy and agricultural commodities and “dampening the outlook, particularly in Europe”
- U.S. labour market strength continues, with wage pressures intensifying, while private domestic U.S. demand remains robust despite the American economy “contracting in the first quarter of 2022”
- Global financial conditions have tightened and markets have been volatile
Canadian economy and the housing market
- Economic growth is strong and the economy is clearly “operating in excess demand,” a change in the language the Bank used in April when it said our economy was “moving into excess demand”
- National accounts data for the first quarter of 2022 showed GDP growth of 3.1%, in line with the Bank’s April Monetary Policy Report projection
- Job vacancies are elevated, companies are reporting widespread labour shortages, and wage growth has been “picking up and broadening across sectors”
- Housing market activity is moderating from exceptionally high levels
- With consumer spending in Canada remaining robust and exports anticipated to strengthen, growth in the second quarter is expected to be “solid”
Looking ahead
With inflation persisting well above target and “expected to move higher in the near term,” the Bank used today’s announcement to again forewarn that “interest rates will need to rise further.”
The pace of future increases in its policy rate will be guided by the Bank’s ongoing assessment of the economy and inflation.
In case there was any doubt, the Bank’s message today was clear: it is prepared to act more forcefully if needed to meet its commitment to achieve its 2% inflation target.
July 13, 2022 is the date of the BoC’s next scheduled policy announcement.