What to expect from next week’s BoC interest rate announcement

The Bank of Canada (BoC) will issue its third interest rate update of the year at 10 am ET on Wednesday, April 10.

Canada’s central bank held the key interest rate at 5% in January and March.

“Consumer Price Index (CPI) inflation eased to 2.9% in January, as goods price inflation moderated further. Shelter price inflation remains elevated and is the biggest contributor to inflation,” the BoC shared in its March update.

“Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average. The Bank continues to expect inflation to remain close to 3% during the first half of this year before gradually easing.”

Canadians saw seven interest rate hikes in 2022. In January 2023, another increase followed, bringing the key rate to 4.5%.

The Bank held its key rate at 4.5%—precisely as experts predicted—until June 7, when it was raised to 4.75%. On July 12, the BoC raised the key rate to 5%, with the bank rate at 5.25%, and on September 6, it announced that it was holding those rates.

This year’s two rate holds came after three consecutive ones in 2023. In a report published in January, Oxford Economics researchers said they believe the 5% key rate will be held until mid-2024 when the BoC will trigger a cycle that lowers the rate.

With this in mind, industry experts are almost sure another rate hold is coming.

Ratehub.ca Co-CEO and president of CanWise mortgage lender James Laird shared his thoughts and expectations for the upcoming BoC announcement with Daily Hive.

“We are expecting a rate hold from the Bank of Canada next week and will look to the accompanying statement to try to figure out if rate cuts are on the near-term or long-term horizon or if the Bank is going to continue playing its cards close to its chest,” he told us in an email.

This year, much of Laird’s forecasts have focused on BoC commentary rather than interest rate numbers, which aren’t expected to move yet.

What should homeowners do depending on the interest rate announcement?

Laird advises anyone with a variable-rate mortgage or home equity line of credit (HELOC) to, once again, study the Bank’s statement for any indication of when they might see rate relief.

“Any indication of rate cuts coming sooner will cause bond yields to drop and fixed rates to follow suit and will put upward pressure on home values,” he said.

The expert believes this solid start for the housing market could cause the Bank to be more cautious in indicating when the first rate cut might happen so as not to “add more fuel to the fire.”

“It will be interesting to see if the Bank comments specifically on concern for the hot start of the housing market that we have seen this year, which was notably absent in the last announcement.”

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