The Bank of Canada announced today that it is holding its overnight rate at 2.25%, meaning there is no change to interest rates for now.

This decision really comes down to two opposing forces in the economy.

On one hand, the economy is showing signs of slowing. We saw a loss of 84,000 jobs in February, with most of those losses coming from the private sector, and unemployment has edged higher. Typically, this kind of data would support rate cuts to help stimulate growth.

On the other hand, inflation risks are starting to rise again, largely driven by energy prices. Oil has jumped significantly in a short period of time, moving from the mid-$60s to close to $100 per barrel. With global supply disruptions, including the situation in the Middle East, higher energy costs are expected to push inflation up in the coming months.

So while inflation had recently come down to around 1.8%, which is within the Bank’s target range, it likely won’t stay there in the near term.

Because of this, the Bank is taking a cautious approach and holding rates steady for now, essentially waiting to see how these competing factors play out.

From a market perspective, this means borrowing costs remain stable for the moment. Variable-rate mortgages remain unchanged today, while fixed rates continue to move with the bond market and have been more volatile recently. The combination of a softer economy and rising inflation pressures is creating some uncertainty, which is why both buyers and sellers are taking a more measured approach.

For those active in the market, this environment is creating opportunities, but also requires a bit more strategy and planning as conditions can shift quickly.

Looking ahead, there is still a possibility of rate cuts if the economy continues to weaken, but rising oil prices and global uncertainty may delay that.

Please don’t hesitate to reach out if you have any questions as the market continues to shift.