Bank of Canada Decreases Rates!
Bank of Canada Decreases Rates!
Date Posted: July 24, 2024
Bank of Canada Rate Announcement
July 2024
The Rate Announcement
In a recent widely expected announcement, the Bank of Canada decreased the overnight rate by 0.25% to a new overnight rate of 4.50%, following their previous decrease in June 2024. The rate decrease in June was the first decrease we have seen since pre-pandemic.
The Bank's Governing Council decided to decrease the policy rate and continue normalizing the Bank's balance sheet. As the global economy grows and inflation in most advanced economies continues to ease, the Bank of Canada agreed to make the decision to keep on track with decreasing rates. Tiff Macklem stated in his opening remarks “we are increasingly confident that the ingredients to bring inflation back to target are in place.”
What Does This Impact?
The Bank of Canada’s target overnight policy rate affects the interest you pay from lenders like banks. The higher the overnight rate, the more interest you will pay. The July 2024 drop from the Bank of Canada means that variable and adjustable mortgage holders will see a decrease in their interest costs and possibly a decrease in their mortgage payments. Fixed rate mortgages are not as directly impacted by the BOC rate announcement, however the bond markets which influence fixed rates have largely already built in the expected 0.25% rate drop.
Getting Back on Track
The Bank of Canada stated “The Bank’s preferred measures of core inflation are expected to slow to about 2½% in the second half of 2024 and ease further in 2025. CPI inflation is forecast to come down below core this fall and settle sustainably around the 2.00% target next year, but it’s unlikely to be a straight line. The Bank remains resolute in its commitment to restoring price stability for Canadians.”
If you have questions about your own mortgage, and the best strategy for you, please contact your broker today.
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