Bank of Canada Makes June Rate Announcement
The Bank of Canada has announced it’s keeping its key interest rate target at 0.25%. On hold since March 2020, the central bank continues to uphold its commitment to not increase the rate until the economy has recovered.
The Bank pointed to many positive signs of recovery in the year’s first quarter including stronger-than-expected household spending and global economic activity which points to rising consumer confidence and resiliency.
Renewed lockdown measures in Q2, however, has affected employment rates especially for part-time and lower income workers. The Bank would like to see the employment rate return to pre-pandemic levels before they move the key overnight rate up, which they forecast will happen in the second half of 2022.
The housing market is also mentioned in the rate announcement, with the bank’s governing council forecasting its surge of activity to balance over time, but likely to remain elevated in the coming months.
With inflation rising to the top of the acceptable range, the Bank expects inflation rates to ease in Q3 and Q4. If the inflation numbers come in as anticipated, then consumers should continue to have confidence that the Bank will not move rates up ahead of schedule. If the inflation numbers do not ease, or worse, continue to rise, then the Bank will be forced to consider moving rates up before they hit their employment rate targets.
Going forward the most notable factors to watch are employment and inflation rates.
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