Bank of Canada raises rate by 0.25%. Unexpected to some, but note that US did recently increase while Canada did not. Underlying inflation remains stubbornly high. Major central banks are signalling that interest rates may have to rise further to restore price stability. Canada’s economy was stronger than expected, housing market activity has picked up, labour market remains tight, excess demand more persistent than anticipated. Concerns have increased that CPI inflation could get stuck materially above the 2% target. “We will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the inflation target.”

This will ripple through to variable rate mortgages – for some the payments will increase, for the ones with the static payments, the amortization will increase; lines of credit payments increase; fixed rates now have less incentive for decrease; upcoming renewals will be impacted; we will have to watch how the housing market plays out as qualifying becomes more challenging.

Next meeting in July 12, 2023.