As expected, the Bank of Canada made another increase to the policy interest rate last week. Prime went up another 0.5%, bringing the prime lending rate to 5.95%.
While inflation has come off its peak, it still remains too high. The Bank of Canada said in its latest Monetary Policy Report that inflation has declined from a peak of 8.1 percent in June due to falling gas prices and reduced inflationary pressures from agricultural products and other global supply bottlenecks. Higher mortgage rates have led to significant declines in housing activity as they continue to work through the economy.
“Future rate 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,” the Bank said in its statement accompanying the decision.
Banks and other financial institutions are expected to raise their prime rate in the coming days, which will increase rates for variable-rate mortgage holders.
Don’t panic! If you feel unsure of what to do next and want a review of your mortgage, reach out and let’s chat. I am here to help and have the resources!
The next scheduled date for announcing the overnight rate target is December 7, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on January 25, 2023.