Canada Prime Rates

The Prime Rate declined to 6.45% as the Bank of Canada reduced the policy rate by 25 basis points to 4.25%.

Inflation reached 2.5% in June 2024, down from a multi-decade high of 8.1% in June 2022. Weakness and oversupply in the economy are pushing inflation down, while shelter and some service costs are keeping it high. Inflation is still higher than the Bank of Canada's (BoC) 2% target, but it is heading in the right direction. Therefore, the BoC is bringing its policy rate toward the neutral rate.

The Bank of Canada lowered its policy rate again, aiming to nail the soft landing of the Canadian economy:

• Annualized seasonally adjusted 9-month inflation between October 2023 and July 2024 was 2.3%.
• Annualized adjusted inflation over the past three months was 2.8%.
• The unemployment rate has risen from 5% at the beginning of 2023 to 6.4%.
• Excess demand is no more, and once again, the Canadian economy is in excess supply of goods and services.

The prime rate rose from 2.45% in March 2022 to 7.2%, its highest level over the past 22 years. After almost one year at 7.2%, it went down to 6.45% over the past quarter. As inflation is heading to the target and the largest contributor to inflation is shelter, whose shortage cannot be resolved by monetary policy, in fact, higher rates result in higher inflation for the shelter component of the CPI basket. In summary, the prime rate is heading down.

The Prime rate in Canada is currently 6.45%. The Prime rate is the interest rate that banks and lenders use to determine the interest rates for many types of loans and lines of credit. These can include credit cards, HELOCs, variable-rate mortgages, car and auto loans, and much more. If you have any of these loans, changes in the prime rate will also change your debt payments and thus your GDS and TDS ratios.