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Bank of Canada Increases Key Rate

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As many economists expected, the Bank of Canada announced today that it is increasing the overnight rate .25 per cent, noting that the "policy interest rate will need to rise to a neutral stance to achieve the inflation target." As for the pace of future rate increases, the Bank will take into account how the economy is adjusting to higher rates, household debt levels, and global trade policy developments. The next rate-setting day is Wednesday, December 5th.


Homeowners with variable-rate mortgages will see their rate increase along with a possible modest payment increase. Lines of credit will be similarly affected.

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Today’s Bank of Canada rate hold announcement marks almost four straight years that the key benchmark rate has remained unchanged, since September 8, 2010. Great news if you have a variable-rate mortgage or home equity line of credit; the prime rate stays at 3%.

 

The announcement noted that “the risks to the outlook for inflation remain roughly balanced, while the risks associated with household imbalances have not diminished.” With these considerations, the Bank is maintaining its monetary policy stimulus, and remains neutral with respect to the timing and direction of the next change.

 

The next rate-setting day is October 22nd.

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