Monetary policy is also further being tightened by the BoC. This is the 5th increase in the overnight rate since March 2022 as the BoC continues to wage its fight against inflation as it strives for price stability in the Canadian economy.
Global inflation remains high due to tight labour markets, volatility of commodity prices, continued supply chain disruptions and the ongoing Ukrainian/Russian war. CPI inflation decreased in July to 7.6 from 8.1% due to a drop in gasoline prices.
However, price pressure continued particularly in services and core inflation continued to increase. The longer core inflation remains elevated the greater the risk that high inflation will become entrenched in the Canadian economy and, hence, the aggressive stance by the BoC to tackle inflation.
Canada’s GDP for the 2nd quarter grew by 3.3% as the economy continues to operate in excess demand and a tight labour market. The BoC expects the economy to moderate in the second half of this year as global demand weakens and tighter monetary policy takes effect in Canada to bring demand more in line with supply.
The BoC remains resolute in its commitment to combat inflation and will continue to take action, as required, to achieve their 2% inflation target. The Prime rate will invariably increase to 5.45% (from 4.70%) resulting in increased mortgage payments for customers with variable rate mortgages.
There is no gloom and doom for variable rate holders as we know that once inflation is brought back in-line the benefits of lower rates for variable rate holders will become significant.
If have questions about your mortgage or your mortgage is coming-up for a renewal in the next few months, contact us to discuss your options. The next scheduled date for announcing the overnight rate target is October 26th, 2022. Warm regards, Keith Baker | kpbaker@shaw.ca | 604.723.5363 Jackie Zerbe | jacqueline@totalmortgage.ca | 604.724.6982 TotalMortgage.ca (@TotalMortgage.ca)