This morning, the Bank of Canada announced it will hold its key interest rate, leaving the prime rate at 4.95% and marking its third straight meeting without a change.

The decision comes as no surprise. The key sticking point remains core inflation, which is still hovering near the 3% mark — above the bank’s comfort zone. Until core inflation drops closer to 2.5% (and ideally near 2%), the bank’s hands are tied, even as many Canadians continue to feel financial pressure.

Unemployment data also offered little room for maneuver: while the economy is clearly showing signs of strain, the jobless rate data from a month ago edged down slightly to 6.9% off the recent 7% high. That small improvement likely gave the bank one more reason to stand pat.

What Does This Mean Going Forward?

While today’s hold may feel disappointing to those waiting for relief, the bigger picture still supports the interest rate downtrend that began last June.

Looking at the factors outside core inflation — such as slowing GDP growth, rising household debt loads, and strained consumer spending — the bank’s next move still appears far more likely to be a cut, not a hike.

The question is simply ‘when?’

• The market is increasingly pricing in the likelihood that meaningful cuts won’t come until 2026.
• That said, should inflation soften faster than expected, the first trim could still appear late this year.
• When the next cutting cycle begins, the market appears to be preparing for 0.50%–1.00% in total reductions — enough to push variable rates into the low 3% to high 3% range.

Fixed vs. Variable

Although fixed interest rates have moved up off their April lows of 3.99%, most 5-year terms sit in the 4.19% to 4.49% range. Even in the face of higher bond yields lately — the fixed rates have remained stable, suggesting Big Bank traders and analysts believe the yields may cool off soon.

Variable rate mortgage terms, criticized recently from 2022–2023, are quietly regaining popularity. With no one in financial markets expecting rate hikes over the next 6-12 months, today’s variable rate offers a stable bridge — and could set borrowers up to capture lower fixed rates later when cuts arrive.

The next Bank of Canada interest rate meeting is not set for another seven weeks, on September 17^th.  That will give them time to analyze two months of data from inflation reports, employment reports and GDP reports.

The Bottom Line

This morning’s hold is exactly what we expected — and the door still appears to be open for future cuts, albeit a little later than we all hoped.

For you, the question should be less about if rates will fall and more about how to position yourself until they do.

Every dollar counts more than ever in today’s market, and that’s why careful planning matters. Whether you’re considering a renewal, debating variable vs. fixed, or just looking for peace of mind, our team at BM Select is here to help you build a strategy that fits your financial goals and risk comfort.