Key points from the Bank of Canada July 2021 announcement:
- The Bank of Canada is continuing to hold the overnight lending rate at 0.25%. Once again, there will be no changes to the retail prime rate of 2.45% (2.60% TD).
- The BoC will taper the Quantitative Easing program down to $2B per week as the economy continues its solid recovery.
- The BoC still projects that in late 2022 they will likely need to start increasing rates, as they will reach their 2.00% core inflation rate target.
The Bank of Canada holds their rates steady.
This morning’s July policy rate announcement had no surprises. The Bank of Canada confirmed they would keep the overnight lending rate at 0.25%.
As the third wave of infections and lockdowns continue to ease, economic growth and activity are on the rise. Despite concerns of the Delta variant, there was a more optimistic mood in the air today compared to June’s meeting.
You can read the Bank of Canada’s full press release here.
The BoC is projecting a very strong 2nd half of 2021 as households resume regular spending habits and employment continues towards full capacity.
Expectations are being set for future increases to rates, but should you be panicking now to lock in rates?
My short answer is no.
The direction of rates is based primarily on inflation risk. Inflation will occur naturally as we pull ourselves out of the economic lows caused by the pandemic. But there is still debate about how much long term sustained inflation we’ll see in the Canadian economy. If inflation slows down and remains below the 2.00% target then there will be no reason for the Bank of Canada to increase their rates.
We are at least another 12 to 24 months away from the speculative rate increases.
My guidance is to keep an eye on rates. Pay attention but don’t flip the switch quite yet.
If you’d like to discuss specifically how the current rate environment impacts your mortgage, you can book an appointment with me here.
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