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• The Bank is continuing with its policy of quantitative tightening.

• How does this announcement affect variable rate mortgage holders? There will be no increase in the mortgage cost on variable rate mortgages and secured lines of credit. 

• The global economy continues to slow and inflationary pressures are reducing and overall financial conditions have also eased, with long term interest rates unwinding from their recent dizzying heights.

• In Canada, higher interest rates have dampened spending and curtailed consumption growth in the last two quarters resulting in GDP contracting to 1.1% in the 3rd quarter, following growth of 1.4% in the 2nd  quarter.

• The labour market continues to ease. Job creation has been slower than labour force growth, job vacancies have declined further and the unemployment rate has risen modestly. 

• All this new economic data suggests that the economy will no longer be in excess demand by the 4th quarter.

• What does this all mean? Inflationary pressures have been reduced over a wider range of goods and services and contributed to the easing of CPI inflation to 3.1% in October.

• Where is there still a dark cloud? Shelter price inflation has picked up, reflecting faster growth in rent and other housing costs along with the continued contribution from elevated mortgage interest costs and high demand for housing due to an influx of immigrants.

• Where is the positive? The actions of the BoC have taken quite some time to work their way through the economy but we are now seeing positive results with inflation decreasing and the economy no longer being in excess demand. 

• The BoC is still concerned about risks to the outlook for inflation and remains vigilant and is prepared to raise the policy rate further, if needed.

The next scheduled date for announcing the overnight rate target is January 24, 2023.

October 25, 2023, the BoC Held its Target for the Overnight Rate at 5%

The Bank is continuing its policy of quantitative tightening.

The global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand.

Consumers’ expectations for interest rates one year from now remain high and many consumers believe that the impacts of the higher interest rates on their household spending are far from over (Source: 3rd Quarter 2023 Canadian Survey of Consumer Expectations).

Inflation has been easing but underlying inflation continues to be sticky and the BoC continues to be vigilant.

CPI inflation has been volatile in recent months—2.8% in June, 4.0% in August and 3.8% in September but higher interest rates are moderating inflation.

The labour market remains on the tight side and wage pressures persist.

Food inflation is easing from very high rates but elevated mortgage interest costs, inflation in rent and other housing costs remains high.

Oil prices are higher than was assumed in July and the war in Israel and Gaza is a new source of geopolitical uncertainty.

The good news: There is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures. 

How does this announcement affect variable rate mortgage holders? There will be no increase in the mortgage cost on variable rate mortgages and secured lines of credit. 

In the BoC’s October projection, CPI inflation is expected to average about 3½% through the middle of 2024 before gradually easing to 2% in 2025.

The next scheduled date for announcing the overnight rate target is December 6, 2023.

Keith Baker | kpbaker@shaw.ca | 604.723.5363              

Jackie Zerbe | jacqueline@totalmortgage.ca | 604.724.6982     

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