Bank of Canada Keeps Interest Rates Steady in September
The Bank of Canada has decided to hit the brakes on interest rate hikes, maintaining its policy rate at the current level. This move reflects the belief that the economy is slowing down enough to warrant no further immediate action.
In their announcement on September 6th, the central bank revealed that they were keeping the overnight rate steady at 5.0%. This decision comes after a series of rate increases, including 25-basis-point increments in the last two meetings held in June and July.
This decision may seem surprising given the recent uptick in the annual inflation rate, which exceeded the Bank’s target range of 1% to 3% in July. However, a contracting GDP and a consistent increase in Canada’s unemployment rate appear to indicate a loss of momentum in the economy.
Despite maintaining the current rate, the Bank emphasized in its announcement that it continues to have concerns about persistent underlying inflationary pressures. They also stated their readiness to raise interest rates again if necessary.
Over the past year, the central bank has raised its trendsetting rate a total of 10 times, resulting in a 475-basis-point increase. This has led to higher borrowing and mortgage costs for many Canadian homeowners and prospective buyers.
Currently, the prime lending rate at most financial institutions stands at 7.2%, with secured line of credit rates reaching as high as 7.7%.