On July 15th, the Bank of Canada announced that it will maintain its overnight target rate at 0.25%, resulting in no changes to Bank Prime of 2.45%. Here are some key takeaways from the announcement:

• After a sharp decline in the first half of the year, global economic activity is increasing as economies re-open.
• Our Canadian economy is in a state of recovery as businesses start to re-open, however, there is still a long road ahead to return to pre-2020 economic conditions.
• Although we have witnessed the deepest decline in economic activity since the Great Depression, the results of this new Covid centered economy we are experiencing are less severe than the worst case scenarios presented back in April

Our main takeaway from the announcement is Governor Tiff Maklem declaring that the BOC will not be raising rates for a minimum of two years. Normally, we don’t see such strongly defined statements for interest rates, but given our current economic climate, this is expected.

We are advising most of our clientele to stick with variable rates for now, as we still expect fixed rates to keep dropping. Also, after the last recession in 2008, we did not see any variable rate increases until 2017, 7 years after the recession ended. If history is any indication, we will not see any rate increases for the foreseeable future.

To read more, see the full press release here.