Today, October 25, 2023, the BoC Held its Target for the Overnight Rate at 5%
The Bank is continuing its policy of quantitative tightening.
The global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand.
Consumers’ expectations for interest rates one year from now remain high and many consumers believe that the impacts of the higher interest rates on their household spending are far from over (Source: 3rd Quarter 2023 Canadian Survey of Consumer Expectations).
Inflation has been easing but underlying inflation continues to be sticky and the BoC continues to be vigilant.
CPI inflation has been volatile in recent months—2.8% in June, 4.0% in August and 3.8% in September but higher interest rates are moderating inflation.
The labour market remains on the tight side and wage pressures persist.
Food inflation is easing from very high rates but elevated mortgage interest costs, inflation in rent and other housing costs remains high.
Oil prices are higher than was assumed in July and the war in Israel and Gaza is a new source of geopolitical uncertainty.
The good news: There is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures.
How does this announcement affect variable rate mortgage holders? There will be no increase in the mortgage cost on variable rate mortgages and secured lines of credit.
In the BoC’s October projection, CPI inflation is expected to average about 3½% through the middle of 2024 before gradually easing to 2% in 2025.
The next scheduled date for announcing the overnight rate target is December 6, 2023.
Keith Baker | email@example.com | 604.723.5363
Jackie Zerbe | firstname.lastname@example.org | 604.724.6982