• MMT App
  • Careers
  • Contact
  • French
  • Find an Expert
  • Home
  • Mortgage Prep
  • Buying a Home
  • Renewal
  • Commercial
  • Rates & Lenders
  • More Value
  • Economic Insights
  • Our House Blog
  • MMT App
  • Careers
  • Contact
  • French
  • Find an Expert
  • All
  • COVID-19
  • Finance
  • Housing Market

Published by Sherry Cooper

January 25, 2023

Bank of Canada raises policy rate by 25 bps to 4.5%.

No Surprises Here: The Bank of Canada Hiked Rates By Only 25 bps, Signalling A Pause

As expected, the Bank of Canada–satisfied with the sharp decline in recent inflation pressure–raised the policy rate by only 25 bps to 4.5%. Forecasting that inflation will return to roughly 3.0% later this year and to the target of 2% in 2024 is subject to considerable uncertainty. 

The Bank acknowledges that recent economic growth in Canada has been stronger than expected, and the economy remains in excess demand. Labour markets are still tight, and the unemployment rate is at historic lows. “However, there is growing evidence that restrictive monetary policy is slowing activity, especially household spending. Consumption growth has moderated from the first half of 2022 and housing market activity has declined substantially. As the effects of interest rate increases continue to work through the economy, spending on consumer services and business investment is expected to slow. Meanwhile, weaker foreign demand will likely weigh on exports. This overall slowdown in activity will allow supply to catch up with demand.”

The report says, “Canada’s economy grew by 3.6% in 2022, slightly stronger than was projected in October. Growth is expected to stall through the middle of 2023, picking up later in the year. The Bank expects GDP growth of about 1% in 2023 and about 2% in 2024, little changed from the October outlook. This is consistent with the Bank’s expectation of a soft landing in the economy.

Inflation has declined from 8.1% in June to 6.3% in December, reflecting lower gasoline prices and, more recently, moderating prices for durable goods.” 

Short-term inflation expectations remain elevated. Year-over-year measures of core inflation are still around 5%, but 3-month measures of core inflation have come down, suggesting that core inflation has peaked.

The BoC says, “Inflation is projected to come down significantly this year. Lower energy prices, improvements in global supply conditions, and the effects of higher interest rates on demand are expected to bring CPI inflation down to around 3% in the middle of this year and back to the 2% target in 2024.” (the emphasis is mine.)

The Bank will continue its policy of quantitative tightening, another restrictive measure. The Governing Council expects to hold the policy rate at 4.5% while it assesses the cumulative impact of the eight rate hikes in the past year. They then say, “Governing Council is prepared to increase the policy rate further if needed to return inflation to the 2% target, and remains resolute in its commitment to restoring price stability for Canadians”.

Bottom Line

The Bank of Canada was the first major central bank to tighten this cycle, and now it is the first to announce a pause and assert they expect inflation to fall to 3% by mid-year and 2% in 2024.

No rate hike is likely on March 8 or April 12. This may lead many to believe that rates have peaked so buyers might tiptoe back into the housing market. This is not what the Bank of Canada would like to see. Hence OSFI might tighten the regulatory screws a bit when the April 14 comment period is over.

Please Note: The source of this article is from SherryCooper.com/category/articles/

Share this:
Categories: Finance

Recommended articles.

View More

The Bank of Canada holds rates steady in the face of tariff uncertainty

April 16, 2025

Bank of Canada Holds Rates Steady In The Face Of Tariff Uncertainty–More Rate Cuts Coming The Bank of Canada held its benchmark interest rate unchanged at 2.75% at today’s meeting, […]

Read More

Tariffs Dampen Canada’s Spring Housing Season

April 15, 2025

Global Tariff Uncertainty Sidelines Buyers Canadian existing home sales plunged last month as tariff concerns again mothballed home-buying intentions. Consumer confidence has fallen to rock-bottom levels as many fear the […]

Read More

Better than expected Canadian inflation in March may not be enough to trigger another BoC rate cut tomorrow

April 15, 2025

Weaker Than Expected Inflation May Not Be Enough to Trigger Another Bank of Canada Rate Cut Tomorrow Canadian consumer prices rose 0.3% in March (or remained flat when seasonally adjusted), […]

Read More

Weak Canadian job growth in March and rising unemployment is the first harbinger of a trade-war induced economic slowdown

April 4, 2025

Weak Canadian Job Creation Is The First Fallout From The Trade War Today’s Labour Force Survey for March was weaker than expected. Employment decreased by 33,000 (-0.2%) in March, the first decrease since […]

Read More

Canadian Inflation Jumped to 2.6% y/y in February As GST Tax Holiday Ended

March 18, 2025

Canadian Inflation Surged to 2.6% in February, Much Stronger Than Expected The Consumer Price Index (CPI) rose 2.6% year-over-year (y/y) in February, following an increase of 1.9% in January. With the federal […]

Read More
  • Find an Expert
  • Home
  • Mortgage Prep
  • Buying a Home
  • Renewal
  • Commercial
  • Rates & Lenders
  • More Value
  • Economic Insights
  • Our House Blog
  • MMT App
  • Careers
  • Contact
  • French
  • Find an Expert

© 2025 Dominion Lending Centres Inc. All rights reserved. Privacy Policy Terms & Conditions