The Bank of Canada raised its key lending rate this morning by 25 basis points this morning, bringing it to 4.75%.
This is the Bank’s second rate hike of the year following two pauses in March and April.
In its statement, the Bank said today’s decision reflects its view that “monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the 2% target.”
It noted that the Canadian economy was “stronger than expected” in the first quarter and that consumption growth is “surprisingly strong,” while also referencing the uptick in CPI inflation in April.
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, which 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.
The Bank’s next announcement will take place July 12.
If you have any questions or concerns about the rise in borrowing costs over the past year, I encourage you to reach out so we can discuss your personal situation and options.
· Read the Bank of Canada’s full statement here.
