This morning it was announced that the Bank of Canada increased its rate by .25%. The rate went from 6.70% to 6.95%. The central bank’s key interest rate has not been this high since April 2001.
After two consecutive rate pauses from the Bank of Canada, the bond market and the GDP are trending upward, putting more weight on the Bank of Canada. Almost expecting another rate increase rather than continuing to pause.
Several factors led to the bank’s decision to raise the key interest rate, including economic growth in Canada. Gross Domestic Product exceeded expectations in the first quarter of this year, growing by 3.1 per cent.
Despite the fact that most households have less disposable income, consumer spending is not slowing at a pace that gives the Bank of Canada confidence that inflation will tick downward. The Spring real estate market has had no shortage of open house activity and multiple offer scenarios once again.
Canada’s economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.1%. Consumption growth was surprisingly strong. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up.
In April, inflation increased for the first time in 10 months to 4.4%. The bank still expects inflation to decline to 3% by this summer, but concerns remain that inflation could get stuck above the 2% target.
“Goods price inflation increased, despite lower energy costs,” reads the statement from CTV News. “Services price inflation remained elevated, reflecting strong demand and a tight labor market.”
Rates have been moving all week resulting in Fixed Rates rising slightly due to the increase to the Bond Market. With the recent announcement of GDP trending upwards, which is not the direction we want in order to keep the BoC rates paused. Also, April’s high inflation rates may have caused the BoC to increase the rates. Major central banks are signaling that interest rates may have to rise further to restore price stability.
Some economists were thinking that the BoC will wait until they see May’s employment statistics, which will be released this Friday after the BoC announcement, to make any changes to the rates. Overnight Index Swap markets are currently pricing in a 34% chance of a rate hike this week, but odds rise to 78% for the Bank’s July meeting
Economists from Desjardins similarly noted earlier this week that whether or not the Bank will hike rates this week is “almost a coin flip at this point.”
If you are stressed or struggling to make ends meet, especially with this new rate hike. Please do not hesitate to contact us today to discuss your options. We understand how frustrating this situation can be.
We can look into switching from a Variable rate to a Fixed rate Mortgage, and arrange all things necessary for you and your family.
You can call the office at 604-552-6190, or you can CLICK HERE to book a free mortgage consultation call with Trish.
Trish & The Primex Team