This morning, the Bank of Canada announced that they will hold the current interest rate. The prime rate will continue to stay at 6.70%. Therefore, for those who have a variable rate credit product, payments will not be increasing.
The stress test qualifying rate will NOT be affected.
Global economic growth has been stronger than anticipated. However, the recent stress in the US banking sector has tightened credit conditions. US growth is expected to continue to slow in the coming months, with particular weakness in sectors that are important for Canadian exports.
Housing market activity remains subdued, and more homeowners have been renewing their mortgages at higher rates.
GDP growth is expected to be weak throughout the remainder of 2023 before gradually strengthening in 2024. This implies that the economy will be approaching excess supply in the second half of 2023.
CPI inflation has eased to 5.2% in February, and the Bank expects a fall to 3% in mid-2023, and eventually to 2% by the end of 2024. Recent data shows that inflation will continue to decline in the next few months. However, it still remains a challenge as service price inflation and wage growth remain elevated, and pricing behaviour has yet to normalize. The bank will continue to set its monetary policy based on these indicators and the trend of core inflation.
Reducing money supply and current economic conditions are continuing to complement the hold on the interest rate. However, the Bank is prepared to increase rates again if necessary, to return inflation to the 2% target.
The next Bank of Canada announcement will be on June 7, 2023.
If you'd like to learn more about this recent announcement or would like to know how this affects you, please feel free to reach out to us and we'd be glad to help!