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Your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from us on the recent Bank of Canada announcement. 

As of 10:00 AM EST on April 12, 2023:

Bank of Canada Held the Overnight Rate at 4.5%

As of 10:00 AM on April 12, 2023, the Bank of Canada has maintained the Overnight Rate at 4.5%.
This was to be expected, as inflation is projected to come down significantly in 2023 after the Bank of Canada hiked its interest rate seven times in 2022.  So far, the first announcement in January 2023 resulted in a 0.25 bps rate hike, resulting in a rate of 4.5%. In March, the BoC became the first major central bank to stop its aggressive hiking cycle, and is currently on a conditional pause.
The Bank of Canada continues to cite inflation as the core reason for its decisions, though the higher interest rates are expected to bring CPI inflation down in 2023.If you feel you are unsure what to do next or want a pro bono review of your financial assets and liabilities, reach out and let’s chat – we are here to help!

How Have Recent Interest Rate Hikes Helped So Far?

The Bank carries out monetary policy by influencing short-term interest rates to stimulate or slow the economy down. It does this by adjusting the target for the overnight rate on eight fixed dates each year.

The Bank of Canada stated its robust interest rate hikes so far have had the following effects:

  • Borrowing rates have gone up for households and businesses.
  • Spending has declined, especially on housing and big-ticket items like furniture and appliances.
  • The job market is tight, but small signs indicate that higher rates are starting to cool it down.
  • Inflation is falling too — partly thanks to lower global energy prices and improved supply chains, but also thanks to lower demand here in Canada.​​
  • Fewer businesses think high inflation will last. That matters because expectations about inflation affect decisions on prices and wages.

In the long run, our banks are pretty safe. The Bank of Canada stands ready to intervene should the financial system become strained and require additional liquidity.

The Bank of Canada’s Business Outlook Survey – First Quarter of 2023

Results from the first-quarter 2023 Business Outlook Survey and the Business Leaders’ Pulse surveys from January through March 2023 show a subdued sales outlook and plans for modest growth in capital expenditures.

The survey — which ask respondents what they think the annual inflation rate will be one, two and five years from now — show expectations for future inflation are falling. This comes as the actual inflation rate has been slowing for months, reaching 5.2% in February after peaking at 8.1%.

The central bank aggressively raised interest rates starting in March 2022 to clamp down on rapidly rising prices. It’s currently holding its key interest rate steady at 4.5% and doesn’t anticipate raising it again, so long as inflation cools fast enough.

So far, the economy has been relatively resilient amid high interest rates. The labour market in particular has shown strength, with the economy continuing to add jobs even as recession talk bubbles.

The Bank of Canada has raised concerns over the tight labour market and rising wages fuelling inflation. Canada’s unemployment rate was hovering near record lows in February, sitting at 5%. Meanwhile, wages were up 5.4% from a year ago.

If you feel you are unsure what to do next, or would like a pro bono review of your financial assets and liabilities, reach out and let’s chat – we’re here to help you!

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