The Bank of Canada is on a nasty record?! Are we done with raising rates?

With the Bank of Canada once again raising interest rates to fight inflation, it remains unclear when a pause might come.

The BoC raised its benchmark interest rate by another 25 basis points, bringing it to its highest level since 2001.

For the average variable mortgage holder recent rate hike means higher payment starting next month. For every $100,000 of the outstanding mortgage balance, they will pay approximately $15 more per month. HELOC owner will pay approximately $21 more per month for every $100,000 of the balance.

The rate increase was carried out against the backdrop of fears of further inflation growth. As a result, the key interest rate is now 5.0%.

Many economists, including Canada’s top six banks, were anticipating the move amid signs of resilience in the Canadian economy and fears that annual inflation would not fall to the central bank’s 2% target.

Headline inflation eased to 3.4% in May from a recent peak of 8.1% in June 2022, but Bank of Canada policy makers have expressed concern that a tight labor market and a resilient economy could make it difficult to contain inflation.

Bank of Canada Governor Tiff Macklem told reporters that while the central bank’s board believes that rate hikes to date have made “significant progress” in slowing inflation, “underlying pressures remain more persistent than expected.”

The central bank now expects inflation to hover around 3 percent next year before “gradually declining to 2 percent in mid-2025.”

The bank’s board did consider leaving the key rate unchanged in July, Macklem said, but ultimately not raising the rate now could mean more aggressive rate hikes going forward.

Rising interest rates increase the cost of borrowing for Canadians, especially for homeowners renewing their mortgages or for those with floating-rate loans whose payments rise in line with the central bank’s base rate.

The next meeting of the Bank will take place on 6 September.

To discuss the implications of the recent rate hike and strategy for new property buyers as well as existing mortgage holders, join us this Saturday July 15 at 7:30 AM for our interview live on the Crossroads Radio Show on FM 88.9. Watch stream on Radio NOVA Toronto or listen online at radionovatoronto.ca.