The Bank of Canada raised its key lending rate by 50 basis points this morning, bringing it to 3.75%.
In its statement, the Bank said interest rates will need to rise further to control inflation, but that future increases, “will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding.” This is the sixth time the rate has been increased since March 2022.
Reasoning
The Bank of Canada cited world wide economic pressures including high inflation, global recovery from pandemic measures, global supply disruptions, elevated commodity prices including oil and gas, the war in Ukraine among others.
See the full announcement here.
What happens now?
In the coming days, banks and other financial institutions are expected to follow the Bank of Canada’s lead and hike their prime lending rate. This rate is used to price variable-rate mortgages, and personal and home equity lines of credit (HELOCs).
This announcement will have no impact on fixed-rate mortgage holders.
This is the sixth consecutive rate increase from the Bank of Canada. The BOC has now increased the overnight target rate by 350 basis points since March. If you have any concerns about this rise in borrowing costs, I encourage you to reach out so we can discuss your personal situation and options.
