What to expect from next week's Bank of Canada interest rate announcement

The Bank of Canada (BoC) is set to issue the second interest rate update of the year at 10 am ET on Wednesday, March 6.

Canada's central bank held the key interest rate at 5 per cent in the last update in January. It came after three consecutive rate holds in 2023.

Canadians saw seven interest rate hikes in 2022. In January 2023, another increase followed, bringing the key rate to 4.5 per cent.

The bank held its key rate at 4.5 per cent — precisely as experts predicted — until June 7, when it was raised to 4.75 per cent. On July 12, the BoC brought the key rate to 5 per cent, with the bank rate at 5.25 per cent, and on September 6, it announced that it was holding those rates.

In a recent report, Oxford Economics researchers said they believe the 5 per cent key rate will be held until the middle of 2024, when the BoC will trigger a cycle that lowers the rate.

Statistics Canada's latest Consumer Price Index shows that the CPI rose 2.9 per cent on a year-over-year basis in January.

With this in mind, industry experts are almost sure another rate hold is coming

Ratehub.ca Co-CEO and president of CanWise mortgage lender James Laird shared his thoughts and expectations for the upcoming BoC announcement.

"Anything but a rate hold will be a shock," he said in an email. "The Bank of Canada will be pleased with the most recent inflation report but will be hesitant to cut rates too early."

Laird believes another overnight rate hold is "almost certainly" coming but says that the Bank's commentary will be the most interesting part of this announcement.

"Consumers will be looking for insights as to when they might see that first rate cut," he shared.

What should homeowners do depending on the interest rate announcement?

The aforementioned commentary anticipated from the Bank of Canada can shift bond yields. Laird says this could cause fixed-rate volatility.

"Anyone with a variable-rate mortgage or a home equity line of credit (HELOC) will have to wait until the Bank actually cuts rates for their mortgage rate to fall," he shared.

"If the Bank suggests rate cuts are coming sooner rather than later, this will put upward pressure on home values as we enter the spring market."