Bank of Canada holds interest rates at 5%: What does this mean for Calgarians?

After numerous key interest rate hikes since March 2022, which brought it to the highest level in over 20 years, the Bank of Canada finally decided to hold the rate at five per cent.

The bank decided against another rate hike, citing easing excess demand in the economy.

Canada’s inflation rate was 3.3 per cent in July, ticking up from 2.8 per cent in the previous month. Inflation is expected to continue oscillating around three per cent for months to come.

However, governor Tiff Macklem said on Thursday at the Calgary Chamber of Commerce that the central bank’s governing council agreed rates may need to rise again.

“In trying to balance the risks of under- and over-tightening, the governing council decided yesterday to keep the policy rate at five per cent and agreed there may be a need to raise the policy rate further if inflationary pressures persist,” Macklem said.

Eric Myers, Mount Royal University finance and human resources instructor, says this will significantly impact those with variable mortgage rates.

“Since an increase in home prices and rental properties, food and groceries and then gas that is what … has caused the increase in inflation. And I think that’s going to continue to be top of mind for the Bank of Canada, when it comes to setting interest rates and trying to decrease the inflation, [the] rates that we’re seeing,” he told CityNews.

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Related Stories:

• Bank of Canada holds key rate steady at 5%, says economy is weakening

• Bank of Canada may need to raise rates again, despite this week’s hold: Macklem

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Myers adds the damage from the previous central bank decision has already been done.

“Rate increases that we’ve seen for the last five to 16 months have caused … less people to be able to qualify for a mortgage, so it’s pushed people out of the housing market and more into the rental market, which is causing rental prices to increase,” he explained.

“It’s made it tougher to get approved if you are in the housing market for X amount of dollars on your home or on the property that you wish to purchase.”

He says it’s now more important than ever that Calgarians stay on top of their finances and keep a close eye on their budgets as the cost of almost everything continues to hike.

Wednesday’s announcement comes after the Bank of Canada raised interest rates at its last two decision meetings, bringing a previous pause on rate hikes to an end.

Altogether, the central bank has raised its key interest rate ten times since March 2022, bringing it from near-zero to the highest level since 2001.