Bank of Canada set to hold interest rates steady Wednesday
Experts say a rate cut is unlikely despite Canada's technical recession, with geopolitical uncertainty keeping inflation pressures alive.
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The Bank of Canada will announce its interest rate decision Wednesday, and most experts predict the central bank will hold rates steady at 2.25 per cent for the fifth consecutive time.
Canada slipped into a technical recession for the first time since 2020, which would normally signal a case for rate cuts. But economists say the geopolitical landscape complicates that picture. The U.S.-Iran conflict is fueling oil price spikes, and while those haven't fully fed through to broader inflation yet, the uncertainty warrants caution.
"Under normal circumstances, today's sagging economy might call for the stimulative jolt of a rate cut. But it's hard to justify cutting the overnight rate when an aimless war is fuelling inflation," says Nerdwallet Canada mortgage expert Clay Jarvis.
Ratehub.ca mortgage expert Penelope Graham agrees a hold is likely, noting that while GDP numbers show contraction over the last two quarters, the headline masks mixed performance and growth is already expected to resume in April. The Bank won't rush to ease rates while awaiting that result.
The calculus is delicate. The Bank has stated it's willing to "look through" spiking oil prices, but as long as the Strait of Hormuz remains closed and supply remains disrupted, the threat of rate hikes will linger.
For mortgage holders and would-be home buyers, the implications are real. Economic anxiety continues to hold back buyers despite spring real estate data showing demand returning. However, there's growing talk that Canada's housing market may have hit its affordability bottom and mortgage rates are poised to rise—which may push timing-conscious buyers to make their move sooner rather than later.
The announcement is Wednesday, June 10.