The Bank of Canada (BoC) chose to hold its policy interest rate on Wednesday, marking the fifth consecutive rate announcement where the central bank has held steady.
Although inflation ticked down closer to the BoC’s 2% target in January, hitting an annual rate of 2.9%, BoC Governor Tiff Macklem has long maintained that a sustained trend of low inflation needs to be seen — not just one or two months — before rate cuts can be considered. The bank appeared to hold this position on Wednesday.
"The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation," the rate announcement reads. "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."
The bank did note, however, that they "expect inflation to remain close to 3% during the first half of this year before gradually easing."
With the housing market seeing increased demand, and mortgage costs being the largest contributor to inflation, the BoC has remained wary of introducing rate cuts too soon and risking another housing market surge, pushing home prices up to even more unaffordable levels. The bank reaffirmed this during the announcement, noting that "shelter price inflation remains elevated."
Wednesday’s hold came as no surprise to market experts, who for months now have predicted that rate cuts likely won’t happen until spring at the earliest, with some even predicting borrowers will have to wait until fall for some relief.
Mortgage holders across Canada have struggled under higher interest rates, with a new report from Equifax Canada showing that mortgage delinquency rates have inched up over the past 12 months. Ontario and BC, home to the country's most expensive housing markets, have been particularly affected, seeing mortgage delinquency rates soar by 135.2% and 62.2%, respectively, compared to Q4 2022, surpassing pre-pandemic levels.
The next BoC rate announcement is scheduled for Wednesday, April 10.
