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The BCREA Blog is a platform for sharing the latest education news, economics statistics, issues relating to the profession and links to valuable resources for REALTORS®, stakeholders and the public.

Bank of Canada Raising Its Target

Published Jul 12, 2017

In light of Canada’s robust economy and a significant amount of economic slack being absorbed, the Bank of Canada announced this morning that it is raising its target for the overnight rate by 25 basis points to 0.75 per cent. While inflation data has been soft, the Bank expects that this is temporary and that inflation will return to its 2 per cent target by mid-2018.

Today's rate increase seems primarily motivated by the Bank’s belief that the stimulus it injected into the Canadian economy through two rate cuts in 2015 is no longer required, given a recent trend of strong economic and employment growth. If this is the case, the likely outcome will be a further 25 basis point increase before the end of the year. If the Bank’s expected 2 per cent target inflation is not achieved, the Bank may decide to stop at a 1 per cent overnight rate.

BCREA expects mortgage rates to rise in the second half of the year, with a finishing rate nearing 3 per cent for a five-year fixed rate. At the moment, Canadian mortgage rates have returned to beginning of the year levels.

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