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September Rate Hike Now Questionable

Interest-RatesA September 5th Bank of Canada rate hike is now in doubt, despite inflation hitting a 4-year high.  Meanwhile, America’s biggest mortgage lender is fearing bankruptcy and Canadian bond rates are dropping.

Here’s what people are saying now:

  • One result of the turmoil in the financial markets is that an interest rate hike by the Bank of Canada in September, which was seen as almost a certainty only a week a ago, is now seen as unlikely.”  Reuters
  • At this point I think all bets are off for a Canadian rate hike at the September meeting.” Stefane Marion, assistant chief economist at National Bank Financial via
  • Raising interest rates is at cross purposes to providing liquidity to resolve a credit crunch.”  Vancouver Sun / Edmonton Journal
  • On the rate expectations side, we’ve pretty much taken out the tightenings expected from the Bank of Canada.”  Mark Chandler, fixed income strategist at RBC Capital Markets  Reuters
  • As long as the commercial paper market remains seized up, the Bank of Canada is highly unlikely to raise the policy rate on the Sept. 5 decision date.”  J.P. Morgan analyst Ted Carmichael via Reuters

Even if rates do stay put in September, however, the Bank of Canada could still raise them at its Oct. 16 or Dec. 4. meetings–if inflation doesn’t subside.  That would increase variable mortgage rates accordingly.

As for fixed mortgage rates, with bond yields falling, fixed rates may come down a bit in the short-term.  National Bank, for one, lowered its 5-year posted rate today by six basis points.