Prime Up 0.5%, What to Expect Moving Forward?

Last week's Bank of Canada rate increase of 0.5% was no surprise and we expect another increase at the next meeting on December 7th resulting in another jump.  Although this is creating some short term pain for many homeowners, the expectation is that, as inflation decreases, rates will follow suit.  In fact, we expect to see rates to start to soften by 2024.  There is a lot of talk of a recession on the horizon and this would also be a catalyst for rate decreases. 

Obviously, there are still several challenges with the economy, including ongoing supply chain issues, labour shortages, increasing rent costs, housing shortages, and now increasing interest rates.  The light at the end of the tunnel is that, because the Bank of Canada is being so aggressive with their rate increases now, it will prevent a massive spike in rates as was seen in the 1980's.  By taking on the short term pain of higher rates now, inflation is being "nipped in the bud", if you will.