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 growth is continuing to slow, and the high inflation is coming down mainly due to lower energy prices. Commodity prices have mostly evolved in line with the Bank's expectations, but the strength of China's recovery as well as the impact of the war between Russia and Ukraine remain a source of risk.
The trend of economic growth in Canada came in flat in the 4th quarter of 2022, which is lower than what the Bank had projected. The labour market remains tight, with employment growth strong and unemployment rate remaining near historic lows.
Inflation was at 5.90% in January, reflecting lower prices for energy, durable goods, and some services. However, prices for food and shelter remain high. Weak economic growth is expected for the next few quarters, and pressures in product and labour markets are expected to ease. This should make it more difficult for businesses to charge higher costs to consumers.
Overall, the latest data is in line with the Bank of Canada's expectation that the inflation rate will come down to around 3% in the middle of 2023. 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 April 12, 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 happy to help!