The Bank of Canada is expected to deliver good news to borrowers and indebted households in an announcement on Wednesday.
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Most economists expect the bank to keep its key interest rate at 5% today – which affects most interest rates, including adjustable-rate mortgages – and to keep it at that level for the rest of the year. less until the end of March 2024.
That’s according to a Portal poll in which 31 of 34 economists surveyed expect no change in the central bank’s overnight interest rate, while the remaining three expect a 25 basis point increase.
Last July, the Bank of Canada published its own survey of economists and other financial market experts. These predicted that the bank would keep its key interest rate at 5% until March 2024 and then gradually reduce it.
The economy is slowing down
The latest numbers from Statistics Canada show Canada’s gross domestic product (GDP) contracted 0.2% in June compared to May, the first decline of 2023.
Recall that in the last 16 months, the Bank of Canada has raised its key interest rate 10 times, from 0.25% in March 2022 to 5% today, to control runaway inflation in the country. The status quo was maintained only twice during this period. This increase in interest rates affected banks’ base rates and variable mortgage rates and led to a sharp increase in borrowers’ monthly payments.
Last July, the Bank of Canada raised its key interest rate to 5%, particularly because consumption growth had been “surprisingly strong and widespread,” according to its analysis.