The Bank of Canada raised its key lending rate this morning by 25 basis points, bringing it to a 22-year high of 5.00%.
This is the Bank’s 10th rate increase since it began this rate-hike cycle in March 2022.
In its statement, the Bank said it has seen an “accumulation of evidence that excess demand and elevated core inflation are both proving more persistent.”
The bank added it will “continue to assess the dynamics of core inflation and the outlook for CPI inflation.”
In its updated Monetary Policy Report, the bank said it expects GDP growth to average around 1% through the second half of the year while it sees inflation hovering around 3% for the next year before falling to 2% by mid-2025.
What happens now?
In the coming days, banks and other financial institutions are expected to follow the Bank of Canada’s lead and hike their prime lending rate, which is used to price variable-rate mortgages and personal and home equity lines of credit (HELOCs).
This announcement will have no impact on fixed-rate mortgage holders.
The Bank’s next announcement will take place September 6.
If you have any questions or concerns about the rise in borrowing costs over the past year, I encourage you to reach out so we can discuss your personal situation and options.