There will be no increase in the interest rate going into the autumn 2023 real estate market, the Bank of Canada announced today.
The target for the overnight rate will remain at 5%, and the Bank Rate will remain at 5¼%
“The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures. Economic growth slowed sharply in the second quarter of 2023, with output contracting by 0.2% at an annualized rate. This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country,” the Bank of Canada (BoC) press release reported.
The Consumer Price Index (CPI) inflation was projected to average at 3%. Here’s where it landed:
- 2.8% in June
- 3.3% in July
Gasoline prices have a big part to play; it’s expected that CPI inflation will increase more before easing up. The 3-month measures are landing around 3.5%, which makes it hard to stabilize pricing. Most economists say there is a “lag” effect of monetary policy, and that rising interest rates will reduce inflation. The BoC goal is to see CPI inflation reduce to 2%.
“[The Bank of Canada] Governing Council remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed,” the press release said. “The Bank remains resolute in its commitment to restoring price stability for Canadians.” The next BoC announcement will be on October 25, 2023, in parallel with a full Monetary Policy Report at the same time.
