|
The Bank of Canada held its key interest rate steady at 2.75% this week, delivering its second consecutive pause as it weighs the impact of persistent inflation and new trade-related risks.
The Bank said it’s waiting for more clarity on how recent U.S. tariffs and inflation trends will affect the Canadian economy before making its next move.
In its official statement, the Bank described the economy as "softer but not sharply weaker," and noted that recent inflation readings showed "unexpected firmness."
That, along with growing uncertainty about trade, led policymakers to hit pause, for now.
What does this mean for borrowers?
If you have a variable-rate mortgage, your rate and payments likely remain unchanged for now. But fixed mortgage rates have inched higher in recent weeks as bond markets react to global tensions and signs that inflation could be stickier than expected.
Still, some economists believe more rate relief is coming, particularly following a record $7.1-billion trade deficit recorded in April.
CIBC expects the Bank of Canada to cut its policy rate by another quarter-point at each of its next two meetings.
As CIBC economist Kathryn Judge put it: "Q2 as a whole is likely to show no GDP growth, with the drop in trade and production curtailments, along with the weakening in the labour market, enough to see the BoC cut rates by 25bps in both July and September in our view."
Markets are currently pricing in a strong chance of another cut in July.
What's next?
The Bank's next interest rate decision is scheduled for July 30, followed by another on September 17. Between now and then, the Bank will be watching inflation, GDP and jobs data closely.
If you're coming up for renewal or shopping for a mortgage, your broker can help you explore your options and stay informed as the outlook continues to evolve. |