Interest rates did not go up again this month, but many are wondering how long this will last.
After steep increases in borrowing costs over the past six months, prospective buyers and homeowners with upcoming mortgage renewals may see rates stay the same or trend lower in the second half of this year.?Last week, it was expected that there might be a small bump in rates, but that didn’t occur. “Governing council will continue to assess economic developments and the impact of past interest rate increases and is prepared to increase the policy rate further if needed to return to the two per cent inflation target,” the Bank of Canada said. The central bank began to rapidly raise interest rates over the last year, bringing it from near-zero to the highest level since 2007.
This has all led to the question as to whether they might start going down again. Mark Carney, the former Bank of Canada governor said he doesn’t see interest rates dropping in 2023. Many others are saying rates can’t stay this high, because the impact on borrowing could create an unprecedented financial crisis. Since inflation has been high, experts predict that lowering rates will help it rise again. Recent data showed inflation in?Canada?slowed to 5.9 per cent in January while the economy posted no growth in the fourth quarter.
Employment in Canada also showed modest growth in February after months of job gains, raising concerns that the bustling labour market could lead to more interest rates hikes. Unemployment is still expected to rise with these higher interest rates, causing less consumer spending, potentially slowing the economy even further.
Remember that no one has a crystal ball and no one really expected rates to go up so quickly in such a short period of time as they have done. It is reasonable to expect the current rates to hold in place, at least for the short term. The bottom line though is that it is anybody’s guess and no one can say for sure what is going to happen next month, let alone six months from now.