January 2024 Bank of Canada Update

Date: January 24, 2024

The Bank of Canada held the overnight rate at 5%.

NO INCREASE and NO CHANGES to Variable and Adjustable mortgage and products

Prime holds steady at 7.20%

The Bank of Canada (BOC) kept its main interest rate steady at 5%, maintaining the Bank Rate at 5¼% and the deposit rate at 5%.

Let’s break down today’s BOC media release:

Global Economic Overview:
- 🌍 Economic growth is slowing worldwide.
- 📉 Inflation is gradually decreasing in most countries.
U.S. Economy:
- 🇺🇸 Stronger than expected.
- 📉 Predicted to slow in 2024 due to weakened consumer spending and business investment.
Euro Economy:
- 🇪🇺 Experiencing a mild economic contraction.
China’s Economic Outlook:
- 🇨🇳 Low consumer confidence and policy uncertainty expected to limit activity.
Oil Prices:
- 💰🛢️ Currently $10 per barrel lower than projected in October.
Global GDP Predictions (BOC):
- 📊 Predicts global GDP growth of 2½% in 2024 and 2¾% in 2025, following 3% in 2023.
Canada’s Economic Situation:
- 🇨🇦 Economic growth has stagnated since mid-2023.
- 📉 Expected to remain near zero through Q1 2024.
- 💼 Consumer spending decreased due to higher prices and interest rates.
- 💸 Business investment contracted.
Labor Market in Canada:
- 💰 Modest excess supply.
- 👥 Labor market conditions have eased.
- 💵 Wages are still rising around 4% to 5%.
Future Economic Outlook for Canada:
- 📈 Economic growth is expected to pick up gradually around mid-2024.
Inflation in Canada:
- 💰📈 CPI inflation in 2023 ended at 3.4%.
- 🏠 Ironically, high shelter costs, including rents and mortgage payments, are leading contributors.
Inflation Projection and Monetary Policy (BOC):
- 💹 Bank expects inflation to hover around 3% in the first half of 2024.
- 📉 Gradual easing back to the 2% target by 2025.
- 🛑 Governing Council maintains the policy rate at 5%.
- 📈 Continuing normalization of the BOC’s balance sheet due to concerns about inflation risks.
BOC’s Emphasis and Monitoring:
- 💹 Emphasizes the need for sustained easing in core inflation.
- 📊 Continues to monitor the balance between demand and supply.
- 💰 Considers inflation expectations, wage growth, and corporate pricing behaviour.
- 📉 Goal is to restore price stability for Canadians.

Click here to read the Full Bank of Canada Statement

The next scheduled date for announcing the overnight rate target is March 6, 2024

Now you’ve made it this far and are wondering what you should do. Here are seven steps actionable steps for you to take to help you through 2024

Monitor Interest Rates: Stay informed – you are already doing that if you are reading this. But don’t just read; engage and ask for help.
Budget for Changes: Plan for the anticipated potential mortgage payment increases in your future and adjust your budget accordingly.
Build an Emergency Fund: Maintain a financial buffer to cover unexpected expenses or changes in circumstances. If you don’t have an emergency fund, let me know, and I will send you a budget worksheet to help you plan.
Assess Overall Financial Health: Regularly evaluate your financial situation; I suggest once a quarter, do an honest deep dive into your savings spending habits and really understand your current and future financial stability.
Seek Professional Advice: Just like visiting the doctor annually for a check-up, if you have never done so, then make this the year you engage with your mortgage broker, financial planner, and accountant, evaluate your situation, and plan for your future.