With an apparent slowing in the country’s inflation rate last month including drops in certain sectors, could an easing of the Bank of Canada’s key interest rate be far off and, more importantly, might we see a drop as early as next week?

The answer, more than likely, is no.

In its Jan. 24 monetary policy report, the Bank of Canada said the inflation rate was easing gradually. However, projections for at least the first half of this year are still pegged at nearly three per cent, slightly above the two per cent rate the bank feels comfortable with when considering the adjustment of its benchmark.

Also known as the policy interest rate, it’s been locked in at an even five per cent since July 23 of last year. Compare that to this time last year, where it was one-half of a percentage point lower, and sat at 3.25 per cent if you go back to the fall of 2022.

“I don’t believe anyone was really surprised that [the rate] didn’t change last month,” Wendy Desjarlais, Vision Credit Union’s Pincher Creek, Alta. branch manager, told Shootin’ the Breeze.

But the rate remaining unchanged comes with an impact.

“For our members renewing mortgages right now, especially those coming out of a five-year, it will be considerably more than the very low rates they were paying,” she said.

“So, that is definitely an adjustment for people. It’s hard.”

Thankfully, her branch members, by and large, are holding steadfast, Desjarlais added.

“We haven’t seen anyone falling behind, but we’re here for them and willing to work with people through any challenges they might face.”

While it’s not expected that the country’s key lending rate will fall in the short term, current Bank of Canada governor Tiff Macklem did hint at a softening trend, which the banking community is also hearing.

“The general expectation is that rates will start to go down later this year. Obviously, world events can affect and that can change that in an instant. But the expectation is that sometime later this year, we should begin to see a movement in a downward direction,” Desjarlais said.

“Probably weeks, not months, but any drop, no matter how small, is going to ease that pressure on everybody with everyday expenses.”

For those wrestling with everyday expenses and leaning on one or more credit cards to help get them through, Desjarlais suggested approaching their financial institution sooner rather than later.

Her recommendation — a consolidation loan.

“Don’t wait until you’re struggling to make payments because, by then, sometimes it can be too late. It’s better to be proactive to get a handle on credit card balances,” she said.

The next interest rate announcement was scheduled for next Wednesday, March 6.

By Dave Lueneberg, Local Journalism Initiative Reporter

Original Published on Feb 29, 2024 at 12:17

This item reprinted with permission from   Shootin' the Breeze   Pincher Creek, Alberta

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