Key points from the June 2022 Bank of Canada announcement:
- The Bank of Canada followed through on their projected rate increase of +0.50%
- Economic indicators show strong economics domestically, but creeping uncertainty globally.
- BoC gives clear indication that it will continue to increase policy rates until inflation subsides to target levels.
The Bank of Canada announces a +0.50% increase to the policy rate
Following April’s 0.50% increase, the Bank of Canada has delivered on expectations and increased the overnight lending rate another +0.50%.
The new overnight lending rate is now sitting at 1.50%. The retail bank prime rate will increase from 3.20% to 3.70%.
Today’s announcement came as no surprise. The BoC has been very clear, projecting its intention of increasing the policy rate today by 0.50% in order to curb consumer demand and bring down inflation.
You can read the full press release here.
My take on what’s to come…
The future remains very murky.
There are growing concerns around the world that as central bankers introduce higher policy rates to combat inflation, they will trigger a recession.
The rising cost of debt, food, and oil will weigh heavily on households and businesses, triggering further volatility and slowing growth. We’ve already started to see this in Canada – early projections show that the Canadian economy stalled in the month of April.
What does this mean for mortgage rates?
Early projections this year called for +2.00% to 2.50% increases of the Bank of Canada rate. As of today, the BoC has increased +1.25% since the beginning of the year.
With signs that inflation may be reaching its peak and economic growth slowing, I don’t believe we will get to those projections. Depending on data in coming months, perhaps another 0.25% to 0.50% in increases are in store for the remainder of the year.
My medium term outlook is that if the global economy does head into a recession I would fully expect a reversal of trend to interest rates.
Think yo-yo.
The door is always open
If you’d like to discuss today’s decision and how it relates to your mortgage, you can schedule a convenient call time directly into my calendar below.
