Mortgage Logic

Bank of Canada Eases Key Rate Today

As predicted it would occur, either in June or July this year, for the first time since the Bank of Canada key rate increases peaked in July of 2023 they have decided to begin easing their rate due to the current economic environment in Canada. Their essential thoughts are as causing their action is as follows:

“In Canada, economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR. Weaker inventory investment dampened activity. Consumption growth was solid at about 3%, and business investment and housing activity also increased. Labour market data show businesses continue to hire, although employment has been growing at a slower pace than the working-age population. Wage pressures remain but look to be moderating gradually. Overall, recent data suggest the economy is still operating in excess supply.

CPI inflation eased further in April, to 2.7%. The Bank’s preferred measures of core inflation also slowed and three-month measures suggest continued downward momentum. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average. However, shelter price inflation remains high.”

With inflation (their main objective to influence) easing towards their 2% target, the BoC feels that maintaining a higher rate has passed. They will continue to monitor and adjust their rate as needed. The BoC key rate will directly impact major FI’s Rime Rate and thus variable / adjustable lending products including non-fixed rate mortgages.