Mortgage Blog
Bank of Canada Rate Announcement - December 6, 2023
December 6, 2023 | Posted by: Ken Fadel
To no one's surprise, the BoC left its benchmark interest rate unchanged at 5% today, marking the third consecutive hold as the economy continues to show signs of weakening. The bank has left rates on hold since it made a 25 bps hike in July, as it continues to assess the impact of its tightening campaign.
Global inflation has eased further as most economies around the globe continue to slow. In the US however, robust consumer spending has resulted in stronger than expected growth. However it is likely to weaken in the months ahead as past rate increases work their way through the economy.
The Canadian economy shrunk in the third quarter as real GDP contracted 1.1% year-over-year as higher interest rates continue to hamper spending. Personal consumption growth in the last two quarters has been close to zero, and business investment while volatile, has been essentially flat for the past year. The labour market continues to ease as job creation has been slower than labour force growth, job vacancies declined further and the unemployment rate has risen slightly.
The slowdown in the Canadian economy is also reducing inflationary pressures as CPI inflation slowed to 3.1% in October. Shelter price inflation however has accelerated as rising rents and elevated mortgage interest costs have taken their toll.
As always, the BoC remains concerned about risks to the outlook for inflation and remains prepared to raise the policy rate if necessary. Having said that, the vast majority of economists believe the Bank will begin cutting rates at some point next year, although the exact timeframe remains unclear.
The next interest rate announcement is scheduled for January 24, 2024. The BoC will also publish its next full outlook for the economy and inflation at that time.