The Bank of Canada holds interest rates steady on October 25 2023

We can all breathe a sigh of relief with today's interest rate update.

The Bank of Canada has just announced that it will maintain the overnight target rate at 5%, marking the second consecutive decision to keep it steady. As a result, the Bank's lending prime rate will remain at 7.2%.

The current focus for the Bank of Canada remains to bring inflation back in line with the targeted 2%. The Bank of Canada is anticipated to begin cutting rates in late 2024  into 2025. During the next few years, adjustable-rate mortgage holders are likely to see lower payments.

Let's take a brief look back over the past two years:

In 2022, the Bank of Canada implemented a series of seven consecutive overnight rate hikes. Then, in January 2023, they made another upward adjustment, bringing the key rate to 4.5%. This rate was maintained until June, when it was raised to 4.75%. On July 12, the Bank of Canada further increased the key rate to 5% in an effort to combat inflation, and they announced there would be no further increase last month.

In today's statement, the Bank commented on the economic landscape: "Inflation has been easing in most economies as supply chain issues are resolved and weaker demand alleviates price pressures. Nevertheless, persistent underlying inflation remains a concern for central banks. Elevated oil prices compared to July's assumptions and the ongoing Israel-Gaza conflict introduce new sources of geopolitical uncertainty."

The rate announcement also included the following statement: "The Governing Council is troubled by the slow progress towards price stability and the heightened risks of inflation. They stand ready to further increase the policy rate if necessary. The Governing Council is looking for a downward trend in core inflation and remains focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior. The Bank remains committed to restoring price stability for the benefit of Canadians."

According to Statistics Canada, Canada's inflation rate decreased to 3.6% in July, rose to 4% in August, and then experienced a 0.2% decline in September. Consumer spending in 2023 has remained strong compared to the previous year.

It is conceivable that there will be no additional rate hikes in 2023. The last rate announcement for the year is scheduled for December 6, 2023, and that's when we'll discover the Bank's decision!