The Bank of Canada Increases Interest Rate
The Bank of Canada Increases Interest Rate
The Bank of Canada has announced April 13th that it has raised the overnight rate by .50% to 1.00% to help curb worsening inflation. The Bank will also stop reinvesting and start quantitative tightening starting April 25th. Maturing Government of Canada bonds will no longer be replaced, causing the balance sheet to shrink over time.
According to the Bank, Canada’s economy will increase by 4.25% this year, before decreasing to 3.25% in 2023, and 2.25% in 2024. The first quarter appears to have been better than expected in January, and the second quarter is expected to be even better. With the easing of the pandemic’s mandates, consumer spending is picking up. The war in Ukraine is delaying global recovery, while most economies recover from the impact of COVID-19’s Omicron variant. The impact of the war on European countries’ confidence and supply interruptions is significant. The Chinese economy is dealing with new COVID outbreaks as well as a continuing slump in its housing market.
Domestic demand in the United States is strong, and the Federal Reserve has made it clear that it will utilize its monetary policy instruments to keep inflation under control. As policy stimulus is phased out, US growth is likely to slow to a pace that is more in line with potential. Financial conditions around the world have tightened, and volatility has risen. Strong overseas demand and high commodity prices will support further growth in exports and business. The excessively high level of activity in the housing market in expected to regulate. The next scheduled date for announcing the overnight rate target is June 1, 2022.
If you have any questions in regards to the rates, please give us a call to speak with one of our mortgage specialists at (416)621-7501.
