Kelowna 
Today, the Bank of Canada hiked the overnight rates by 25 basis points to 4.5%.
The bank rate will now be 4.75 % and the deposit rate, 4.5%.
The central bank says though the inflation has declined from 8.1% in June to 6.3% in December, short-term inflation expectations remain elevated as price increases for food and shelter remain persistent. The Governing Council made the decision to increase the policy interest rate by a further 25 basis points since year-over-year measures of core inflation are still around 5%.
New prime lending rates
In response to the rate increase, Canada’s big banks have announced that they are hiking the prime lending rate by 25 basis points from 6.45% to 6.70%.
- National Bank: 6.7%
- Desjardins Group: 6.7%
- Scotiabank: 6.7%
- CIBC: 6.7%
- Bank of Montreal: 6.7%
- TD Canada: 6.7%
- RBC Royal Bank: 6.7%
Scotiabank Variable Rate Mortgage/Credit: Scotiabank.com
What this means to you:
If you have a home equity line of credit or variable mortgage, your interest payments will increase as the rates are pegged at the prime rate plus (or minus) a margin.
For example, if your line of credit is Prime +0.15%, then effectively today, your new rate will be 6.85% (6.7+0.15) from 6.60% (6.45+0.15).
What to expect in the near term:
Bank of Canada expects inflation to come down this year due to lower energy prices, improvements in global supply conditions, and the effects of higher interest rates on demand to reduce inflation to around 3% by the middle of this year and back to the 2% target in 2024.
Hence the Governing Council expects to “hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases. Governing Council is prepared to increase the policy rate further if needed to return inflation to the 2% target, and remains resolute in its commitment to restoring price stability for Canadians.”
The next rate change announcement is scheduled for Wednesday, March 8, 2023.
