April 2023 | Bank of Canada Rate Announcement
The Bank of Canada (BoC) maintained its target for the overnight rate at 4½% at its meeting of April 12, 2023.
This is the second consecutive time that the BoC has not increased its key rate after having raised it 8 previous and consecutive times over the last year for a total of 4.25%.
Inflation is easing due to lower energy prices and improving supply chain throughput but high rents persist and a tight labour market are keeping core inflation under pressure.
The BoC projects the Canadian economy to grow by 1.40% this year, by 1.30% in 2024 and picking up to 2.50% in 2025.
On a positive note: CPI inflation eased to 5.20% in February with core inflation (CPI less food and energy prices) at just below 5%.
The BoC expects CPI inflation to fall quickly to around 3% by the middle of 2023 and then return more gradually to 2% by the end of 2024.
The BoC maintains that reaching the inflation target of 2% will still be challenging due to persistent wage growth and elevated service price inflation.
The BoC will continue with its quantitative tightening as it continues to assess whether its monetary policy continues to work its way through the economy due to pricing pressures and remain prepared to raise its policy rate further, if needed, to return inflation to the target rate of 2%.
What does this mean for consumers? For clients on variable rate mortgages or who are utilising Lines of Credit there will be no further rate increase, at this point in time. Bond yields have been decreasing, as well, resulting in fixed rates decreasing and so that is very positive news for those clients whose mortgages are coming up for renewal. As always, please reach out to us if your mortgage is maturing within the next 6 months so that we can put a strategy in place that may benefit you at maturity.
The next scheduled date for announcing the overnight rate target is June 7, 2023.