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The Bank of Canada Held the Target Overnight Rate of 0.25%

  • The Bank of Canada held the target overnight rate of 0.25%. The Bank is maintaining forward guidance and adjusts quantitative easing program. This is reinforced by the Bank’s quantitative easing (QE) Program. The adjustment reflects the continuous progress towards recovery and the strength of the Canadian economic outlook.
  • Clients with variable mortgage rates and credit with fluctuating, non-fixed rates, will not see any impact to their rates.
  • The Bank’s Governing Council believes that the Canadian economy still has considerable excess capacity. Accordingly, it intends to hold its policy interest rate at the effective lower bound and will do so until economic slack is absorbed so that its 2% inflation target is “sustainably achieved.”
  • A good time to borrow  – With the benchmark rate unchanged and the economic recovery expected to gather steam, conditions remain favourable for all types of property financings.

  • The third wave of the virus in Canada, decelerated the growth in the second quarter. However, falling COVID-19 cases, vaccinations and easing containment restrictions all point to a strong pickup in the second half of this year. The expected GDP growth of around 6% in 2021 is now revised to 4.5% and projects 3.25% growth in 2023.
  • Normal spending and consumption patterns is expected to lead the recovery of the economy, while housing market activity is projected to ease back from historical highs. Moreover, international demand should support a solid recovery in exports.
  • CPI inflation was 3.6 percent in May, boosted by temporary factors that include base-year effects and stronger gasoline prices, as well as pandemic-related bottlenecks as economies re-open.
  • The Bank of Canada remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s July projection, this happens sometime in the second half of 2022. The Bank’s QE program continues to reinforce this commitment and keep interest rates low across the yield curve.
  • The next scheduled date for announcing the overnight rate target is September 8, 2021.
  • Sources: Bank of Canada

Contact Information

For further information about this change, please contact any member of the Outline team as we are on standby to help run the numbers and/or provide guidance on any specific scenario.

  • We will be updating this blog as more facts come in about the potential changes.  For any questions, or for more information, please contact:

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