No Rate Cut

BofC Variable-rate mortgage holders will be slightly disappointed this morning.  The Bank of Canada surprised many Bay Street economists by not lowering it’s key interest rate

As recently as Sunday, 12 of 12 primary securities dealers had expected a 1/4% cut.  It once again shows how hard it is to predict rate direction and the Bank of Canada’s intentions.  Perhaps there was some herd mentality in those forecasts as well.

In a statement just moments ago, the BoC said:

  • The risk of inflation has “shifted slightly to the upside.”
  • The Bank projects that “economic growth will pick up this year and accelerate in 2009.”
  • “If current levels of energy prices persist, total CPI inflation will rise above 3 per cent later this year.”

By 9:15am, Canada’s 5-year bond yield had soared to 3.57%.  It hasn’t been this high since January.  That could slow or halt the decline in fixed mortgage rates as well.

The next Bank of Canada interest rate meeting is July 15.

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