Bank of Canada Maintains Consistent Interest Rate Amidst Anticipated 3% Inflation Decline in 2021 | CBC News

On Wednesday, the Bank of Canada made the decision to keep the interest rate at a constant 4.5 per cent level as the effects of previous rate increases are still being felt throughout the economy.

The central bank has clearly conveyed its plan to maintain current interest rates for the foreseeable future.

Pete Evans wrote a piece for CBC News.

Blog section published on April 12, 2023 at 10:04 AM EDT - most recent update was made two hours ago.

On Wednesday, the Bank of Canada made the decision to maintain the current interest rate of 4.5 per cent. This choice was made in order to see how the previous rate hikes have affected the economy.

Economists had predicted that the bank would take this action since it had already hinted its plan to temporarily stop increasing interest rates following eight previous hikes that happened from March 2022 to February of this year.

Following the initial slashing of its standard lending rate at the onset of the pandemic with the intent of supporting the economy, the bank subsequently launched a robust drive of raising interest rates in the first months of 2022 due to the staggering increase in inflation rates to levels not seen in years.

In June 2022, Canada's inflation rate reached its highest point, exceeding eight per cent. However, by February 2023, it had declined to slightly above five per cent. The next week will see the release of data for March, and industry experts predict that the rate is expected to have dipped to as little as four per cent.

The Bank of Canada has decided to take a break for some time due to the reduction in economic growth. This is because the cooling effect is taking place.

The bank declared its decision on Wednesday and shared in its Monetary Policy Report that it anticipates the recognized inflation rate to decrease to three per cent by mid-year and drop to its intended two per cent rate by the end of next year.

During a press conference after the announcement, Governor Tiff Macklem expressed that achieving a three percent inflation rate this summer will bring comfort to Canadians. However, he emphasized that the bank's work is not finished until they bring back stability to pricing.

"That's where we're headed - we're currently en route and we're determined to continue going in the right direction."

VIEW | The Bank of Canada reports that their efforts to increase interest rates are yielding positive results.

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The financial institution has not ruled out the possibility of implementing additional increases in interest rates if deemed necessary in the future. However, the individuals responsible for making these decisions have conveyed a clear message that they believe the previously implemented rate adjustments have successfully accomplished their intended goal of tempering economic growth and ultimately decreasing inflation.

According to Carolyn Rogers, who serves as the bank's deputy governor, the previously implemented increases in interest rates "will lead to a decrease in spending; however, this reflects the impact of monetary policy in terms of reducing demand throughout the economy, and achieving the necessary equilibrium to bring inflation back in line with our target."

Concerns of Homeowners about Increase in Rates.

If the bank has truly finished increasing interest rates, it's just in time for individuals who own a mortgage, such as Eddie Ko.

Five years ago, he and his wife made a purchase of a condo in the downtown Toronto region, and they secured their mortgage for that same period of five years due to the unpredictability of the market.

The loan is due for renewal this summer and Ko has been offered new mortgage rates. These rates could potentially result in a drastic increase of $800 for their monthly payment compared to what they have been paying previously.

During an interview with CBC News, he expressed his surprise at the rapid rise of rates, which he had anticipated would increase.

According to Ko, his family has reduced their expenses to only things that they absolutely need, and he is concerned that it may not be sufficient.

At the moment, we are only able to get through each day as it comes and rely on our earnings from each pay period. Unfortunately, we are unable to set aside additional funds for an emergency savings account.

Pete Evans holds the position of the main writer focusing on business affairs at CBCNews.ca. He has formerly contributed pieces to the publications such as the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. To get in touch with him, you can reach out via his Twitter handle, @p_evans, or by email at [email protected].