Warning: More Rate Hikes To Come

Tomorrow will be the 7th rate announcement from the Bank of Canada this year. Of the last 6 announcements, 5 have resulted in rate hikes. Big rate hikes. Rate hikes we haven’t seen yet this century. To put things into perspective, most announcements we’ve seen in the last 12 years haven’t resulted in any movement to rates at all. And when they have, it’s been by no more than 0.25% (up or down).

Not only is it unheard of to announce 5 rate hikes in a row; but these rate hikes have reached as high as a full percentage point. Ludicrous. After 5 unprecedented increases, you would think that rates would plateau. 

Unfortunately I’m here to tell you that we’re not quite out of the woods. Yet.

What’s To Come

On October 26th, 2022, the Bank of Canada will most likely announce another whopper of a rate hike. Probably by 0.50%-0.75%. I’d love to say that this will be the final rate hike of the year, but these days, it’s impossible to know. The BoC has proven that they don’t always keep their promises. Not to mention, they’re under an enormous amount of pressure to bring down the inflation rate.

The problem with this is that inflation reports are roughly 6 months behind our current reality, meaning if we’re making headway, we won’t know it just yet. What I will say is that inflation has come down incrementally – so there’s a chance the BoC could start slowly taking their foot off the pedal.

When Will Rates Start to Come Down?

We can’t know for sure when the hikes will end. What we do know is any further hikes could be damaging to the economy. We also know that regardless of where we finally plateau, rates won’t be sky high forever. The end of 2023 should see rates come back down once again. 

No doubt, these are murky waters to navigate. If you’re at a loss for what to do next, check out my last blog post where I outline different scenarios and how to handle them. Or, better yet, shoot me a call or an email. Major financial decisions are tough to make in any economic climate, never mind the one we’re currently in. 

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca