Bank of Canada raises its key interest rate to 5% | CBC News

The Bank of Canada raised its benchmark interest rate by 25 basis points on Wednesday, marking the first time since April 2001 that the figure hit five per cent.

The move was expected by economists after Statistics Canada released its June labour force survey last week, which showed that Canada added 60,000 jobs last month — further contributing to an overheated economy.

Following the announcement, experts diverged on whether Canadians could expect another increase after the summer. 

“While the Bank of Canada didn’t shut the door to more monetary tightening, Canadians might finally be seeing some light at the end of the rate-hiking tunnel,” Desjardins economist Royce Mendes wrote in a note.

Meanwhile, CIBC economist Andrew Grantham wrote that “a continued hawkish tone within today’s statement suggests that risks are skewed towards another hike after the summer.”

Wednesday’s rate hike marks the 10th by the central bank since March 2022. It hit pause on those hikes in January for a few months to determine whether the economy had sufficiently cooled, then resumed its campaign in June.

“Global inflation is easing, with lower energy prices and a decline in goods price inflation. However, robust demand and tight labour markets are causing persistent inflationary pressures in services,” the bank wrote in its release.

Canada’s economy has been more resilient than expected, the bank noted in its monetary policy report. Its updated projections now suggest that it will take longer to hit its two per cent inflation target than previously thought.


While the hikes are meant to curb consumer spending, the report noted that “excess demand” persists, including in the retail sector — and the country’s booming population contributes to job growth, spending and demand for housing.

Canada’s inflation rate slowed to 3.4 per cent in the year up to May.

‘I’ve thought about selling’

With today’s rate hike, a homeowner’s variable mortgage rate will increase to 6.05 per cent with monthly payments rising to $4,348, according to statistics from mortgage analytics site RateHub.ca.

Homeowners will pay $100 more per month on their mortgage payments — or $1,200 per year.

Leena Chandi, a single mother of three who purchased her Surrey, B.C., townhouse seven years ago, said she would lie down and cry if another hike were announced, as it was on Wednesday.

Having started on a fixed mortgage, she switched to a new bank and took on a variable rate about a year and a half ago — before the Bank of Canada began its quest to tame an overheated economy with a series of interest rate hikes.

A woman stands in front of a black and white photo with three women in it.
Leena Chandi, a single mother of three, purchased her Surrey, B.C., townhouse seven years ago. She’s watched her variable mortgage rate double since the Bank of Canada began its aggressive campaign to cool inflation. (Martin Diotte/CBC)

“All of a sudden, boom. The first increase happened and I was like, ‘OK, well, whatever, you know, that’s fine, I can handle it,” Chandi told CBC News.

“And then the second increase happened and then the third increase happened, and then the fourth and then the fifth, and now my mortgage payment is doubled.”

Chandi said her biweekly payments increased from $800 to $1,300 during that period.

“I’ve thought about selling. I really have because … my townhouse is now probably worth three times, almost 2 1/2 times what I paid for it. But where am I gonna go?”

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