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Bank of Canada Interest Rate

This Page's Content Was Last Updated: November 2, 2024
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Bank of Canada

Today's Bank of Canada Rate:

3.75%

Updated November 18th, 2024

Latest Update: October 23, 2024

The Bank of Canada reduces Its Policy Rate by 0.5% to 3.75%.

The Bank of Canada (BoC) reduced its policy rate while continuing its policy of quantitative tightening. September saw inflation decline to 1.6% from 2% and 2.5% in August and July.

The Bank of Canada reduced its Policy Rate.

  • Canada’s unemployment rate has risen from a trough of 5% at the beginning of 2023 to 6.5% in September 2024 and is likely to climb further.
  • Canada's GDP increased by 2.1% annually in the second quarter of 2024 (vs. 2.4% population growth) and 1.8% in the first quarter of 2024 (vs. 2.4% population growth).

The Bank of Canada rapidly increased its policy rate from 0.25% in March 2022 to 5% in July 2023, bringing higher prime rates and variable and adjustable mortgage rates. That was in response to a high inflation rate, reaching a 30-year high of 8.1% in June 2022, which brought about one of the most aggressive interest rate hikes in Canada’s history. Higher rates have cooled demand and the easing of supply chain constraints has increased supply. The economy is now in oversupply and this condition is pushing inflation down. Over the coming months, the weakness in the economy would most likely dominate and further rate cuts would be warranted.

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Bank of Canada Background

The Bank of Canada is a crown corporation and Canada's central bank. It was chartered in 1934 under the Bank of Canada Act and is responsible for formulating Canada's monetary policy and regulating Canada's financial systems. Its principal role is "to promote the economic and financial welfare of Canada". Led by a governing council, its main tool for conducting monetary policy is the target for the overnight rate, or the key policy rate. By changing this rate, it can influence the supply of money circulating within Canada's economy. It is also solely responsible for the issuance and distribution of Canadian currency and regulation of foreign currency reserves.

Today’s Mortgage Rates

TermLowest RatesAverage Rates
(10 Lenders)		 30-Days Change of Average Rates
HELOC5.85%
----
-Year Fixed%6.79%
-1 bps lower
-Year Fixed%6.31%
3 bps higher
-Year Fixed%5.12%
-19 bps lower
-Year Fixed%5.07%
-1 bps lower
-Year Fixed%4.93%
16 bps higher
undefined-Year Variable%5.41%
-49 bps lower

The basket of 10 lenders includes: CIBC logoCIBC, BMO logoBMO, TD logoTD, Scotiabank logoScotiabank, RBC logoRBC, National Bank logoNational Bank, Desjardins logoDesjardins, nesto logonesto, Tangerine logoTangerine, First National logoFirst National

*Prior to March 2024, HSBC Canada was included in the basket

Bank of Canada Meeting Schedule

Past Meetings

Release DateTarget Overnight RateChange
January 24, 20245.00%No Change
March 6, 20245.00%No Change
April 10, 20245.00%No Change
June 5, 20244.75%-0.25%
July 24, 20244.50%-0.25%
September 4, 20244.25%-0.25%
October 23, 20243.75%-0.50%
Release DateTarget Overnight RateChange
January 25, 20234.50%0.25%
March 8, 20234.50%No Change
April 12, 20234.50%No Change
June 7, 20234.75%0.25%
July 12, 20235.00%0.25%
September 6, 20235.00%No Change
October 25, 20235.00%No Change
December 6, 20235.00%No Change
Release DateTarget Overnight RateChange
March 2, 20220.50%0.25%
April 13, 20221.00%0.50%
June 1, 20221.50%0.50%
July 13, 20222.50%1.00%
September 7, 20223.25%0.75%
October 26, 20223.75%0.50%
December 7, 20224.25%0.50%
Release DateTarget Overnight RateChange
March 4, 20201.25%-0.50%
March 13, 20200.75%-0.50%
March 27, 20200.25%-0.50%
Release DateTarget Overnight RateChange
January 17, 20181.25%0.25%
July 11, 20181.50%0.25%
October 24, 20181.75%0.25%
Release DateTarget Overnight RateChange
July 12, 20170.75%0.25%
September 6, 20171.00%0.25%
Release DateTarget Overnight RateChange
January 21, 20150.75%-0.25%
July 15, 20150.50%-0.25%
Release DateTarget Overnight RateChange
June 1, 20100.50%0.25%
July 20, 20100.75%0.25%
September 8, 20101.00%0.25%
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How the Bank of Canada Determines Its Target Overnight Rate

The Bank of Canada bases its monetary policy decisions on the growth of the Consumer Price Index (CPI), a measure compiled by Statistics Canada. The CPI tracks changes in the cost of a “basket” of goods and services commonly purchased by Canadians, offering a broad snapshot of consumer spending across the country.

Through its policy tools, the Bank of Canada aims to keep inflation, measured by changes in the CPI, within an optimal range. Established in 1991, the inflation-control target is set at 1% to 3%, with a midpoint target of 2% as the preferred rate for annual inflation. This target range is reviewed periodically, with the latest review conducted in 2021.

The Bank of Canada assesses its benchmark interest rate eight times a year, considering both domestic and global economic conditions and potential risks. While the Bank operates independently of the government, it remains accountable to Parliament through the Minister of Finance.

How the Overnight Rate Works

The banks don't like to hold cash and like to earn interest on their money whenever possible. Sometimes, Bank A might have a lot of cash on its hands, while Bank B might be short of cash. Bank A is more than happy to lend money to Bank B.

Everyday, the banks come together and make offers to borrow and lend money. The rate that they settle on is called the "overnight rate" because it's the interest rate for borrowing Canadian dollars "overnight". The Bank of Canada has a "target overnight rate" and tries to keep the overnight rate close to the target. If the rate gets too low because there's too much money, the banks can lend their money to the Bank of Canada instead. If the rate gets too high because there's a shortage of money, the Bank of Canada acts as a "lender of last resort" and will lend out money.

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Bank of Canada Overnight Rate Changes Since 2010

Release DateTarget Overnight RateChange
June 1, 20100.50%0.25%
July 20, 20100.75%0.25%
September 8, 20101.00%0.25%
January 21, 20150.75%-0.25%
July 15, 20150.50%-0.25%
July 12, 20170.75%0.25%
September 6, 20171.00%0.25%
January 17, 20181.25%0.25%
July 11, 20181.50%0.25%
October 24, 20181.75%0.25%
March 4, 20201.25%-0.50%
March 13, 20200.75%-0.50%
March 27, 20200.25%-0.50%
March 2, 20220.50%0.25%
April 13, 20221.00%0.50%
June 1, 20221.50%0.50%
July 13, 20222.50%1.00%
September 7, 20223.25%0.75%
October 26, 20223.75%0.50%
December 7, 20224.25%0.50%
January 25, 20234.50%0.25%
June 7, 20234.75%0.25%
July 12, 20235.00%0.25%
June 5, 20244.75%-0.25%
July 24, 20244.50%-0.25%
September 4, 20244.25%-0.25%
October 23, 20243.75%-0.50%
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Bank of Canada Overnight Rate Forecast

Bank of Canada Rate Forecast for 2025: Continuation of steep decline in the first half and stability over the second half

UPDATED OCTOBER 31, 2024

Reverse globalization arising from protectionism and tensions between the West on the one hand and China, Russia, and some smaller states on the other will be an inflationary force. Transitioning to more sustainable energy sources necessitates significant investments in energy infrastructure, which will be another inflationary force.

Demography is another inflationary force in action. The average age is climbing in parts of the world that produce and consume most goods and services, including Japan, Europe, the US, and China. As the retirees grow as a portion of the population (if other factors stay the same), economic output reduces. Therefore, an aging population is another inflationary force in action.

The presence of such inflationary forces will prevent the BoC from aggressively cutting rates. This prediction assumes a soft landing. We might face a deep recession, and the BoC might cut rates aggressively in response. Our base case scenario is for 2025 to start with a BoC policy rate of 3.5% and to end with a policy rate of 2.75%.

Why Not Negative Rates?

The zero lower bound is no longer the strict rule that it once was - the European Central Bank (ECB), the Bank of Japan (BOJ), and central banks of Denmark, Sweden, and Switzerland have all experimented with breaking the zero barrier. The ECB had used negative deposit rates from June 2014 until July 2022, and the BOJ had a negative discount rate from January 2016 until February 2024.

The Bank of Canada and Mortgage Rates

Through the key policy rate and its other monetary policy tools, the Bank of Canada influences the interest rate for all borrowing and lending transactions in Canada. For example, changes in the key policy rate usually lead to changes in bank Prime rates. Subsequently, the key policy rate has significant influence on variable mortgage rates that are based on a lender's Prime rate.

Changes in the expectations about the key policy rate and monetary policy can also affect fixed mortgage rates. Fixed mortgage rates usually follow the yields of Government of Canada bonds with a term to maturity similar to the mortgage term. For example, 5-year fixed mortgage rates follow 5-year Government bond yield. A shift in monetary policy can lead to changes in the bond yields, which will then lead to changes in fixed mortgage rates.

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Bank of Canada Overnight Rate History

The Beginnings of Canada's Central Bank in 1935

The Bank of Canada was created as part of the Bank of Canada Act in 1935. It was recommended by the Royal Commission in response to the economic conditions of the Great Depression. In March 1935, the Bank of Canada was opened to the public as a private institution with shares sold to public investors. It was quickly nationalized as a public institution by an amendment to the Bank of Canada Act in 1938.

1935 - 1945: The Great Depression and World War II

The Bank of Canada rate (not officially the target overnight rate until much later in the century) started at 2.5% in 1935 and ended at 1.5% in 1945. The economy strengthened during the war as Canada played a vital role in supplying natural and manufactured resources to the Allies. There was also increased employment, especially of women. The decrease in the Bank of Canada rate encouraged people and businesses to borrow money to invest in new manufacturing plants and housing.

1946 - 1976: The Post-War Period

After World War II, the Bank of Canada rate did not rise until October 1955, when it was changed to 2.0%. This low-interest rate environment promoted investment in new infrastructure, manufacturing, housing and consumer goods.

1977 - 1991: Stagflation

After the upward change in 1955, the Bank of Canada rate continued to rise slowly throughout the 1960s and early 1970s. In October 1978, the benchmark rate hit double digits for the first time at 10.25%. This was due in part to the global oil crisis and the OPEC oil embargo. With record-high prices for oil in August 1980 that continued into 1981, the Bank of Canada rate hit an all-time high of 20.03% in August 1981. The lowest rate reached during this period was 7.14% (March 1987).

1991 - 2008: Economic Recovery

After the recession of the 1980s, the Bank of Canada rate between 1991 – 2009 generally went downwards with only a few exceptions. The inflation-target rate was introduced at the beginning of this period.

2009 - 2017: The Great Financial Crisis

In March 2009, the BOC rate dipped below 1% for the first time to 0.5% in response to the Great Financial Crisis. Despite a minor recovery, in 2014, oil prices dropped a staggering 60%, causing a recession in Canada's oil-driven export economy. The Bank of Canada rate then dropped from 1.25% to 0.75% in 2015.

2018-2021: Low Inflation and COVID-19

Despite widespread economic growth, 2018 and 2019 were marked by continued low inflation, preventing the Bank of Canada from raising rates above 1.75%. This was quickly reversed with the impact of COVID-19, with three 50-basis-point drops in March 2020. The drop in policy rate was followed by quantitative easing (QE), which vastly expanded the BoC’s balance sheet and, thus, the money supply in the Canadian economy.

The Bank of Canada rate lay near its lowest-ever value at 0.25% for two years to contract the effect of the Covid pandemic on the economy. This policy coincided with substantial increases in government transfers and worked too well. The expansionary monetary and fiscal policy caused inflation to reach a multi-decade peak in summer 2022.

2022 - Present: Battling High Inflation and Steering for Softlanding

Inflation forced the BoC to change course early in 2022. During 2022 and 2023, the BoC fought inflation through a combination of quantitative tightening (QT) and a series of rate hikes. By the end of July 2023, the BoC rate had reached 5%. The policy rate stayed at the restrictive level of 5% until June 2024, when declining inflation was causing a passive tightening in the financial conditions. In June 2024, the BoC started easing its policy rate to avoid overly tight financial conditions from pushing the Canadian economy into recession. By August, the CPI inflation reached BoC’s inflation target, and BoC is trying to steer the Canadian economy into a soft landing.

Disclaimer:

  • Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
  • The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
  • Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
  • Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.