The Bank of Canada today increased its target for the overnight rate by 0.25% to 4.75%. How does this increase affect mortgage holders and consumers? The mortgage cost on variable rate mortgages will increase whilst the mortgage cost for fixed rate mortgages holders will be unaffected. This is a good time to reach out to us if you have a maturing mortgage coming up for renewal in the next 120 days so that we can secure rate-holds and make use of any rate-windows that may offer attractive rate options.
CPI inflation ticked up in April to 4.4%, the first increase in 10 months with prices for a broad range of goods and services coming in higher than expected.
Concerns have increased that CPI inflation could get stuck materially above the 2% target with three-month measures of core inflation running in the 3½-4% range for several months and excess demand persisting.
Nonetheless, the Bank continues to expect CPI inflation to ease to around 3% in the summer, as lower energy prices feed through and last year’s large price gains fall out of the yearly data.
Canada’s economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.10%.
Demand for services continued to rebound. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up.
Overall, excess demand in the economy looks to be more persistent than anticipated and the BoC’s policy rate increase of 0.25% plus continued tightening is squarely aimed to bring supply and demand back into balance and return inflation sustainably to the 2% target.
The BoC will remain focussed on evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving their inflation target as the BoC remains resolute in its commitment to restoring price stability for Canadians.
The next scheduled date for announcing the overnight rate target is July 12, 2023. Watch Video Warm regards, Keith Baker | kpbaker@shaw.ca | 604.723.5363 Jackie Zerbe | jacqueline@totalmortgage.ca | 604.724.6982 TotalMortgage.ca (@TotalMortgage.ca)