Wednesday, February 28, 2024

Merry Christmas homeowners: Bank of Canada freezes interest rates at 5%

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In a decision announced on Wednesday, December 6th, the Bank of Canada has decided not to increase interest rates on borrowed money one last time before the new year.

The overnight interest rate is going to be held at 5% until early next year when they will once again have to decide whether or not to bump it up. 

The interest rate has been driving upwards over the last year in an effort to slow down spending and keep the inflation rate in check, among other things. 

The higher inflation gets, the more the Bank of Canada will bump up the overnight interest rates.

This is because the higher the interest rate, the higher the cost of things such as buying a home or a car with a mortgage or financing will be. 

Just last year, inflation was up to around 9%,while this October, it was recorded at 3.1% which shows that the Bank of Canada’s efforts may have succeeded in driving down spending, and inflation with it. 

The Bank did however concede that the price of shelter, such as rent or mortgages continues to rise and the drop in inflation rate is largely due to the drop in gas prices that has been seen over the last few months.  

According to the Bank of Canada, most things are looking up for the economy as the year comes to a close. 

The American dollar has weakened against many countries, including Canada, and oil prices are down compared to what they were anticipated to be. 

In terms of jobs, the rate of unemployment is slightly up and wages have been increasing at a rate of around 4% to 5%.


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Because of these numerous contributing factors and more, the Bank of Canada says that it has decided to hold the interest rate at 5%. 

However, the Bank says they are still concerned about the outlook on inflation going into the new year and are prepared to raise the rate once again if needed.

“[The] Governing Council wants to see further and sustained easing in core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour,” said the Bank of Canada in a statement. 

The next scheduled date for announcing if the overnight rate will rise, fall or remain held will take place on January 24th.

mm
Curtis Blandy
curtis@victoriabuzz.com

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