BoC holds target rate at 5 per cent
November 3, 2023
As expected, the Bank of Canada (BoC) left its overnight target rate at 5.00 per cent at its October 2023 setting, which means the prime rate will stay at 7.20 per cent for variable-rate mortgage borrowers.
In its October 25 statement, BoC noted it is seeing “clearer signs that monetary policy is moderating spending and relieving price pressures,” although not quite as quickly as it would prefer.
“Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed,” the BoC statement continued.
Despite improvements made on the inflation front and the reduction in underlying housing demand, economists say it remains too soon for BoC to let down its guard.
“Price and wage growth remain too fast for the BoC to back off its hawkish rhetoric just yet,” said BMO’s Douglas Porter.
Porter said BMO expects the current rate to hold well into 2024, however, due to a slower economy and low inflation.
The Government of Canada 10-year bond yield, meanwhile, is now at its highest level since 2007.