Bank of Canada Holds Overnight Rate Steady Amid Slow Growth and High Inflation, Future Hikes Unlikely

With the recent report of inflation still exceeding 3%, it came as no surprise today that the Bank of Canada did what most economists were forecasting and held the overnight rate steady at 5% in the first policy decision of 2024.

The Canadian economy has stalled since mid-2023 and growth is forecasted to remain slow through the first quarter of 2024. Notably, housing costs, which are contributing to inflation, have proven resistant to change due to high demand and limited supply. The Bank is closely monitoring the situation, emphasizing the need for sustained easing of core inflation and a better balance between demand and supply before considering a reduction in rates.

On a positive note, the softening of the economy has led to a consensus that further rate hikes in 2024 are unlikely. Governor Tiff Macklem stated that future announcements are shifting from “Whether monetary policy is restrictive enough to how long to maintain the current restrictive stance.” This comes as welcome news for Canadian households following the ten rate hikes implemented since March 2022.

If you have any questions about your new or existing mortgage or your upcoming mortgage renewal or want to be sure you are still getting the best solution for your situation, please don’t hesitate to reach out to me for a free consultation.

The next Bank of Canada announcement is scheduled for March 6th, 2024. I'll make sure to keep you informed.