This Wednesday, the Bank of Canada is expected to raise its policy rate by 75 basis points.
It would be the largest rate hike since 1998 for the BoC.
This would result in the Bank's target overnight rate being 2.25%, and a prime rate of 4.45% (on which variable-rate mortgages and lines of credit are priced). 2008 was the last time Canadians saw a prime rate above 4%.
Inflation remains stubbornly high at 7.7%, so the Bank of Canada will have to act aggressively to break consumer expectations of high inflation at its upcoming meetings.
"Unless the BoC breaks inflation psychology this month and in September-and/or oil prices plunge-CPI's return to 2% could take more than two years," wrote mortgage expert Rob McLister. Past inflation spikes prove that.
Several comments and outlooks have been released recently regarding the BoC's upcoming meeting:
On rate-hike expectations:
On the latest employment data:
On the September rate decision:
Royal Bank of Canada has expressed concerns about increasing the overnight lending rate and Canada entering a recession. In fact, RBC suggests that if the BoC raises the overnight lending rate by another 75 basis points in September, this move will plunge Canada into an indefinite recession.
Bank of Canada preview: 75-bps rate hike in the cards this week - Mortgage Rates & Mortgage Broker News in CanadaBank of Canada preview: 75-bps rate hike in the cards this week - Mortgage Rates & Mortgage Broker News in Canada (2022). Available at: https://www.canadianmortgagetrends.com/2022/07/bank-of-canada-preview-75bps-hike-in-the-cards-this-week/ (Accessed: 12 July 2022).
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929