Bank of Canada Keeps Rates and Rate-cut Hopefuls on Hold

December 6, 2023

Great news this morning - the Bank of Canada held it’s overnight rate at 5%!

The Bank of Canada knows full well that high rates are squeezing borrowers, yet, it’s in no hurry to signal rate cuts and rekindle inflation, warning that it “remains prepared to raise the policy rate further if needed.” Notably, the Bank ditched the “inflationary risks have increased” tune it sang at the last meeting in October. Today’s rate announcement directly affects variable rate mortgage holders.

Key highlights from today’s meeting:

  • Bank of Canada maintains overnight rate at 5%, Bank Rate at 5¼%, and deposit rate at 5%.
  • Global economy is slowing, and inflation is decreasing.
  • U.S. experienced strong growth led by consumer spending, but it's expected to weaken due to past policy rate increases.
  • Euro area growth weakened, contributing to reduced inflationary pressures.
  • Oil prices are $10-per-barrel lower than assumed in October.
  • Canada's economic growth stalled in 2023, with a 1.1% contraction in Q3.
  • Higher interest rates are limiting spending; wages still rising by 4-5%.
  • Economic slowdown is reducing inflationary pressures, with a 3.1% CPI inflation rate in October.
  • Bank of Canada maintains policy rate at 5% and continues normalizing balance sheet.
  • Governing Council remains concerned about inflation outlook risks.
  • Prepared to raise policy rate further if needed, emphasizing sustained easing in core inflation.
  • Bank committed to restoring price stability for Canadians.

Where are fixed rates at?

In more positive news, I’ve seen fixed rates starting to come down over the past couple of weeks! Fixed mortgage interest rates are closely correlated to Canada bond yield returns. Fixed mortgage rates tend to move in tandem with changes in bond yields, reflecting broader economic conditions and market dynamics.

As you can see in the chart below the Canada bond yields have been trending downward over the last month leading to mortgage lenders passing on lower fixed rates to borrowers!

As always, I’m here to answer any of your questions and help in any way I can! Book a call to discuss your mortgage questions and needs at www.BookWithJenna.com

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