Bank of Canada increases overnight rate by 0.50%. Your variable rate mortgage and secured lines of credit will increase. ‘Quantitative tightening QT’ continues. Admits “The risk of elevated inflation becoming entrenched has risen.”

“With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further. ”

“Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target.”

Next meeting July 13.

Bank of Canada increases overnight rate by 0.50%. Your variable rate mortgage and secured lines of credit will increase.  The tone of announcement is rates need to rise due to inflation.  ‘Quantitative tightening QT’ in effect this month, which means  government no longer replacing maturing bonds on the Bank’s balance sheet.

Core inflation now declared at average almost 6% in the first half of 2022 and to remain well above the control range throughout this year. “Return to the 2% target in 2024.” But then provides interesting warning: “There is an increasing risk that expectations of elevated inflation could become entrenched. The Bank will use its monetary policy tools to return inflation to target and keep inflation expectations well-anchored.”

Mentions US Federal Reserve and use of their monetary tools, demonstrating how our two economies are linked.

Announcement ends again with reminder “Interest rates will need to rise further. The policy interest rate is the Bank’s primary monetary policy instrument, and quantitative tightening will complement increases in the policy rate.”

Next meeting June 1.

Bank of Canada increases overnight rate by 0.25%. Your variable rate mortgage and secured lines of credit will increase.  Increased inflation is the theme of the announcement.  Announcement ends with note on expected future interest rate increases.

“CPI inflation remains well above the Bank’s target range.

Price increases have become more pervasive, and measures of core inflation have all risen.

Inflation is now expected to be higher in the near term than projected.

Persistently elevated inflation is increasing the risk that longer-run inflation expectations could drift upwards. ”

Next announcement April 13.

Lenders still to confirm if they will match their prime rate with same increase. It is expected so, although there were a few times historically that it was not exact match. Your lender should be providing you with rate change notification.

The Bank of Canada decided to maintain the overnight rate. This means your variable rate mortgage remains unchanged. However, they presented strong language suggesting the rate will need to be increased.

The Bank has ‘removed its exceptional forward guidance on its policy interest rate’, which means these emergency rates will need to move. ‘Overall economic slack now absorbed’, the Bank is only maintaining its bond buying pace (‘reinvestment phase’). You may now be hearing the term ‘quantitative tightening’ (QT), which means the act of reducing the central bank’s holdings of Canadian government bonds on its balance sheet.

Over the last year, the Bank was stating inflation may be ‘transitory’, stirring many opinions on this assessment. But recently, this language has been dropped entirely from their announcements. The Bank admits inflation now remains well above the target range of 2%, but also expects ‘to decline reasonably quickly’ to about 3% by the end of this year and then gradually ease towards the target over the projection period. However, it bookends the announcement stating ‘The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation.’

In general, interest rate increases are imminent. The Bank has limited policy tools at their disposal, really, so they resort to talking about changes without exercising their tools. Basically raising the rates without raising the rates. They do not want to surprise the market.

Their policy decision is stuck between hot inflation and negative economic impact from the pandemic. Raising rates too quick would also have a negative impact, so they need to carefully execute. The market is fluid, and there are varying assessments on how many rates hikes we will see this year. Some traders are assessing 6 or 7 times this year, that is probably too much to bear realistically. A fairer assessment could be about four hikes this year, equal to maybe 1%, but we will have to see. Equally important is what the US Federal Reserve decides to do, as our economies are very inter-connected. The next Bank of Canada announcement is March 2.

Bank of Canada maintains overnight rate. Your variable rate mortgage remains unchanged. The Bank is maintaining its bond buying pace, purchasing bonds solely to replace maturing bonds (“reinvestment phase”). Its assessment of inflation sees little change, expects inflation to remain elevated in the first half of 2022 and ease back towards 2% target in the second half of the year. “The Bank is closely watching inflation expectations and labour costs to ensure that the forces pushing up prices do not become embedded in ongoing inflation.” Next announcement Jan 26.

Bank of Canada maintains overnight rate. Your variable rate mortgage remains unchanged.  The Bank is ending quantitative easing (QE) and moving into the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds. It still states  the economy continues to require considerable monetary policy support.   The Bank backed off describing inflation as ‘transitory’ and now is closely watching inflation expectations and labour costs to ensure that the temporary forces pushing up prices do not become embedded in ongoing inflation.  Recovery estimated ‘sometime in the middle quarters of 2022’.

Next announcement Dec 9.

Bank of Canada maintains overnight rate. Your variable rate mortgage remains unchanged. Naturally, due to upcoming election, the boat is not being rocked. Status quo message: transitory inflation and recovery still estimated second half 2022. “These factors pushing up inflation are expected to be transitory, but their persistence and magnitude are uncertain and will be monitored closely. Wage increases have been moderate to date, and medium-term inflation expectations remain well-anchored. Core measures of inflation have risen, but by less than the CPI.”

Bank of Canada maintains overnight rate. Your variable rate mortgage remains unchanged. Not much change from the last announcement’s narrative. Provided more details about their inflation assessment. “The factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely.” Bank maintains 2% inflation target expected sometime in the second half of 2022. “We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.”

Bank of Canada will hold current level of policy rate until inflation objective is sustainably achieved, adjusts quantitative easing program. Exact same words as last announcement. Comments on temporary factors for inflation.

“There is still considerable excess capacity, and the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed. Based on the Bank’s latest projection, this is now expected to happen some time in the second half of 2022.”

Next announcement July 14.

Effective June 1, government increases stress test rate, both for insured (low downpayment) and uninsured mortgages. Translates to a reduction in buying power by approximately 4 to 4.5%.
Mad rush to submit offers before deadline, this will be messy. Probably creating even more bumps in prices.
Consensus opinion is this does nothing for helping first time homebuyers. Originally the proposal was only for ‘uninsured’ mortgages (over 20% downpayment), then they sneak in last minute announcement for ‘insured’ mortgages, which is largely first time homebuyers.
Technical details: Stress test is now higher of 5.25% (up from 4.79%) or the contract rate plus 2%.