The Bank of Canada has announced an increase in its target for the overnight rate to 4¾%, with the Bank Rate at 5% and the deposit rate at 4¾%. The bank is also adopting a policy of quantitative tightening. While this may sound complex, let's break it down into simpler terms and understand the implications of these decisions.

Global Economic Landscape:

Consumer price inflation worldwide is on a downward trajectory, largely due to lower energy prices compared to the previous year. However, underlying inflation remains persistently high. To address this, major central banks across the globe are signaling the possibility of another rare increase in the Fall to restore price stability

Canadian Economic Performance:

In the first quarter of 2023, the Canadian economy demonstrated greater strength than expected, with a GDP growth rate of 3.1%. Surprisingly robust and broad-based consumption growth, even after accounting for population gains, played a significant role. Additionally, spending on interest-sensitive goods increased, and the housing market witnessed a recent uptick in activity. The labor market remains tight, with higher immigration and participation rates expanding the supply of workers. However, new workers are being quickly absorbed due to strong demand for labor.

Inflationary Trends in Canada:

CPI inflation increased to 4.4% in April due to higher prices for goods and services. The Bank expects inflation to ease to around 3% in the summer, but concerns remain about persistently high core inflation and excess demand, thus the measures taken. 

The Bank's Actions and Future Considerations:

The Bank increased interest rates and adopted quantitative tightening to address inflation and restore balance. Core inflation, wage growth, and corporate pricing will guide future decisions. The Bank is committed to price stability.


The Bank of Canada's proactive measures aim to manage inflation, balance supply and demand, and foster economic stability. Ongoing monitoring will guide future decisions to achieve the inflation target.

This is a blip in our otherwise strong marketplace. It’s not the rate increase, but more the media that surrounds the increase that creates the buzz. There are a lot of buyers with reserved rates that need to buy, buyers are out, and we have a complete shortage of inventory. Don't wait, take advantage of the market right now while the inventory is still low, it won’t be forever! 

Tanya Rocca 
Posted by Tanya Rocca on
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