Two weeks ago, the odds that the Bank of Canada would continue to reduce interest rates at today’s meeting were 50/50. But just last week, those odds had changed dramatically with China’s implemented tariffs on Canadian goods, our employment numbers coming in flat, and the threat of looming U.S. tariffs appearing more and more like a reality. Leading up to this morning’s Bank of Canada rate decision, the market appeared to be telling Canadians that another rate cut was incoming; and sure enough, the market was right. Just minutes ago, Tiff Macklem announced another 0.25% decrease to the country’s key interest rate. This is the bank’s seventh rate reduction in a row, bringing their total to 2.25% in decreases since they began their rate-cutting cycle last June.
This now brings the Bank of Canada prime rate down to 4.95%, with most variable rate mortgage holders paying anywhere from 3.95% to 4.65%, depending on their discount to prime.
Anyone planning to purchase a home this spring or summer just gained purchasing power if they were opting for a variable rate. The stress test for variable rate mortgages has officially reduced, and this will cause maximum pre-approval amounts to go higher.
The next Bank of Canada meeting comes only five weeks from today, on April 16th. It will be very interesting to see how things play out between now and then. We are due two inflation reports before the next Bank of Canada interest rate meeting, with the February data being released on March 18th. The March data will then follow, being released on April 15th.
At this time, all attention will be on Donald Trump's tariff discussions and whether he will follow through on the tariffs he’s postponed month after month.
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