As anticipated, the Bank of Canada has reduced the current policy rate by 0.25% for the second time since the tightening cycle began on March 2020. As such, Prime Rate will now be 6.70%. 

Direct impact to this announcement will be felt by mortgage holders with variable or adjustable rate mortgages and by those who have secured or unsecured lines of credit that are priced against the prime rate. This rate cut does not have a direct correlation to fixed mortgage rates as fixed rates are priced against the bond market. If you are unsure if you are impacted by this announcement, please book a time to chat HERE!

Along with the rate announcement, the Bank of Canada also released their quarterly Monetary Policy Report. If you're looking for some light summer reading, click HERE to see the report in its entirety. 

In their announcement, the Bank of Canada touched on the June CPI inflation reading. After increasing in May, the June reading came in at 2.7%, increasingly closer to the Bank of Canada's target 2% reading. It was encouraging to see the Bank of Canada indicate that CPI is nearing what they call the historical norm and that the biggest contributor to total inflation is Shelter price (driven by rent & mortgage interest cost). 

The Bank of Canada indicated that their decision was supported by broad price pressures continuing to ease and inflation expectations continuing to move closer to 2%. A strong eye will be kept on "price pressures in some important parts of the economy -- notably shelter and some other services -- holding inflation up".

This is welcome news to many (if not all) Canadians who have been doing their best to stay above water while the cost of living has grown across most of the country. While there is still much work to be done to return to more day-to-day stability, this is certainly a moment where a collective sigh of relief can be made. 

Information note

We understand that there may still be many questions and concerns amongst out clients and partners. If you're feeling stretched by monthly payments, are anxious about an upcoming renewal, or just want to chat, please reach out so we can talk. The next announcement is scheduled to take place on September 4th, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on October 23, 2024.