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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. 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 [...]

BREAKING NEWS The Bank of Canada has hiked its overnight target rate by 25 basis points to 5.00%. The move was expected by markets and marks the Bank’s 10th rate hike since starting this rate-hike cycle in March 2022. In its statement, the Bank stated "Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation. In particular, 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. The Bank remains resolute in its commitment to restoring price stability for Canadians." Inflation eased to 3.4% in May from it's peak of 8.1% last summer however demand and labour markets are causing inflationary pressures. [...]

The Bank of Canada has hiked its overnight target rate by 25 basis points to 4.75%. The move was partially expected by markets and marks the Bank’s first rate hike since January. In its statement, the Bank said that with consumption growth “surprisingly strong” and an uptick in inflation in April, it determined 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 said it will “continue to assess the dynamics of core inflation and the outlook for CPI inflation.” It noted that “concerns have increased” that inflation could remain persistently higher than that level, although its expectation that it will ease to around 3% by mid-summer remains unchanged. The [...]

The Bank of Canada has announced no change to its benchmark interest rate in today's announcement for a second consecutive month as it continues a careful pivot away from its rate-hiking trajectory of the past year.  A further sign that it believes the heavy lifting has been done in efforts to cool the economy and battle inflation. That decision had been widely expected by leading Canadian economists based on a poll by Reuters last week indicating that a majority anticipated the Bank would hold its policy rate steady in this announcement – and leave it unchanged for the remainder of the year – with a small minority even suggesting that a rate cut could be in the cards by the end of 2023. The Bank [...]

Given the slowdown in inflation in the recently released CPI numbers in January, the Bank of Canada has left its overnight target rate unchanged, keeping it at 4.50%. This is the Bank’s first rate hold of this rate-hike cycle, which began in March 2022. The move was expected by markets and is a welcome change to homeowners with Variable-rate or Adjustable-rate mortgages or HELOCS. The Bank indicated “Governing Council will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2% target. The Bank remains resolute in its commitment to restoring price stability for Canadians.” Bank earnings are under pressure with higher taxes and capital requirements, [...]

The Bank of Canada has announced another quarter point hike to its benchmark rate.  This is the eighth consecutive rate increase in its mission to curb inflation that had surged to its highest level in nearly 40 years in June of last year.  Read their full announcement There is a growing consensus that the Bank has now reached, or is close to, its terminal rate for this rate-hike cycle. Officials from the Bank of Canada have indicated that its future rate decisions will be driven by economic data. The next announcement will take place March 8, 2023. As noted in Mortgage Professionals Canada’s January 2023 Housing and Mortgage Market Review released Monday, some progress has been made in the fight against record-high inflation. “While borrowers [...]

The Bank of Canada has raised its overnight target rate by 50 basis points, bringing it to 3.75%. This is the Bank’s sixth consecutive rate hike and was expected by markets. The Bank said interest rates will need to rise further to “restore price stability” for Canadians, but that future moves will be data dependent. “Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding,” the Bank said in its statement accompanying the decision. Banks and other financial institutions are expected to raise their prime rate in the coming days, which will increase rates for variable-rate mortgage holders. Read the full article here

Home sales in Canada declined for a sixth straight month in August according to the latest report from the Canadian Real Estate Association.  Compared to July the number of properties changing hands dipped by a modest 1.0%, the smallest drop so far.  Year-over-year, sales are down 24.7%. Home prices also continue to slip.  The national average price is down almost 4.0% from last August, at just shy of $638,000.  That is a 20% drop from the peak in February, just before the Bank of Canada started raising interest rates.  Taking Toronto and Vancouver out of the calculation drops the average price to $523,000. CREA’s preferred measure of home prices, the Composite Aggregate Home Price Index, shows a 1.6% drop between July and August.  But year-over-year [...]

September has arrived and the central bankers are back from their summer vacations. With that they resume setting interest rates and fighting inflation.  Leading up to today market watchers were forecasting an increase of  50 - 75 basis points.  Today at 10am the BoC raised the overnight rate by 75 basis points to 3.25%. They indicated in the announcement that "the economies are evolving broadly in line with their July projection". This increase has pushed the BoC’s trend-setting overnight rate out of its neutral zone and into restrictive territory.  The Bank considers a 2% to 3% rate to be neutral; it neither enhances nor restricts economic growth. Market watchers are now suggesting that we can see the Bank of Canada stay put for the remainder [...]

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update on the recent Bank of Canada announcement. If you are like me I've been waiting all morning for this to see what direction the Bank of Canada was going to take.  As of 10AM EST on July 13, 2022, the Bank of Canada has increased their Overnight Rate by a full 1%. This exceeds what most had forecast but, as in the last Bank of Canada update there were indications that there would be a number of increases this year in an effort to combat inflation in the current markets. What's next? This will likely not be the last rate [...]