Another BoC Rate Hike Likely

Interest Rate Pause May Be Over

The Bank of Canada's conditional pause on interest rates may be over, with markets now pricing in a near-certainty of another hike on Wednesday.

The central bank raised rates by 100 basis points to 2.50% in June, the largest single rate hike in more than two decades. At the time, the BoC said it would pause rate hikes to assess the impact on the economy. However, recent data has shown that inflation remains stubbornly high, and the economy is still growing.

As a result, economists now believe that the BoC will hike rates again on Wednesday, by either 25 or 50 basis points. This would bring the policy rate to either 2.75% or 3.00%.

The trajectory of interest rates matters greatly for the roughly 40% of Canadian mortgage holders who have not yet renewed their mortgages since the central bank began raising rates. Higher interest rates will mean higher mortgage payments for these borrowers.

The Bank of Canada will announce its decision on the target for the overnight rate on Wednesday, July 13, 2022. A press release will provide a brief explanation of the decision.