Like most of its last 29 rate announcements, today’s Bank of Canada rate statement was a snoozer. But for those with debt, dull is good. It keeps a lid on variable-rate borrowing costs.

For most, the only meaningful line in the BoC’s statement was:

“With inflation expected to be well below target for some time, the downside risks to inflation remain important.”

In other words, there’s no danger of variable rate hikes for as far as the eye can see. So, if you’re like most financially secure borrowers in a discounted adjustable-rate mortgage, there remains little reason to lock in.

Besides inflation, the other risk occupying the Bank’s time is the overleveraged consumer. On that topic it said:

“Recent data support the Bank’s expectation of a soft landing in the housing market and stabilizing debt-to-income ratios for households.”

That leaves the usual focal points for the BoC: GDP growth, employment and (most importantly) inflation.

RBC summarized the BoC’s position by calling for no hikes “until there is clear evidence that both the economy and inflation are accelerating.” And the current evidence is muddy at best.

On a side note, the BoC reminded us today of how unforeseeable external factors can alter the course of interest rates. Its reference to “tensions in Ukraine” is case in point. In the event that the situation becomes grave, it could easily have a depressing effect on rates.

Domestically speaking, the next piece of data in the rate puzzle comes this Friday with the Canadian and U.S. jobs reports. Those releases are among the most volatile, but critical, rate determinants.

Bank of Canada Rate Facts:

• Today’s overnight rate: 1.00%
• Last change: June 1, 2010
  (45 months ago)
• Next BoC rate meeting: April 16, 2014
• Today’s prime rate: 3.00%
• Average variable-rate mortgage*: Prime – 0.50%
• Lowest variable-rate mortgage*: Prime – 0.65%

* Source: RateSpy.com March 4, 2014, rate survey. Note that the cheapest variable rates don’t always entail the lowest overall borrowing cost. Often they come with restrictions and/or reduced advice or service levels. Generally, the lowest rates are available only to well-qualified borrowers with provable income.

Rob McLister, CMT (email)

Last modified: April 25, 2014