The Bank of Canada made an interest rate announcement today. They said that it will hold its target overnight interest rate at .25% for deposit rates and .5% for bank rates. It stands by its projection that interest rates are likely to begin to rise in the second half of 2022.
The Bank is also reducing its bond purchasing stimulus program by one third to $2 billion. These weekly bond purchases were created as an emergency economic stimulus. They were reduced because the BOC is optimistic about Canada’s recovery from the pandemic. They said that “increased confidence in the strength of the Canadian economic outlook”, makes them comfortable in scaling back the program.
The bank also noted that the world wide recovery from the virus is volatile, especially in countries where vaccination levels are low. They are keeping an eye on the variants that are emerging.
Expectations are that housing market activity will ease back from the highs we experienced recently. The labour market recovery will vary from industry to industry. Some occupations and businesses are faltering, some are recovering and some are thriving as a result of the pandemic.
Growth is expected to rebound as the economy reopens and is being forecasted to be 6% this year, 4.5% in 2022 ad 3.25% in 2023.
The Bank of Canada indicated in April that rate increases could come to fruition in late 2022 which is a revision of its earlier forecast of rate hikes not until 2023.
See the announcement here
How does the Bank of Canada interest rate announcement affect the consumer?
These announcements affect your mortgage interest rates and should be taken into account when making any mortgage related decisions. Many mortgage borrowers are now considering options moving forward into the next several years. Some are renewing mortgages early in order to take advantage of more years at low interest rates.
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