This morning, the Bank of Canada announced that they have maintained its key interest rate. The prime rate will remain the same at 7.20%. Therefore, for those who have a variable rate credit product, there will be no changes for payments.
Global inflation has slowed in Q2 of 2023, however core inflation remains elevated. Major central banks remain focused on restoring price stability.
The Canadian economy has experienced a period of weaker growth, though it's required in order to relieve price pressures. The wildfires across many regions of the country played a part in weakening consumption growth and a decline in housing activity. Higher rates have also impacted the slow growth and restrained spending among a wider range of borrowers.
Inflation in Canada eased to 2.8% in June and moved up to 3.3% in July, averaging close to 3%, which is inline with the Bank's projections. With the recent increase in gas prices, CPI is expected to be higher in the near term before easing again. The longer the higher inflation persists, the greater the risk that elevated inflation becomes difficult to change, making it more challenging to restore price stability.
Based on this recent data, the Governing Council has decided to hold the rate. The dynamics of core inflation and the outlook for CPI inflation will continue to be assessed, and the Bank is prepared to increase rates further if needed. The Bank remains committed to restoring price stability for Canadians and achieving the 2% inflation target.
The next Bank of Canada announcement will be on October 25, 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!