Globally, Central Bank Interest Rate Policies have been on an upward trend as they evaluated economic momentum and the effects of inflation. In March, the Bank of Canada became the first major central bank to put a pause on interest rate hikes. And then April saw another BoC pause. The Key Rate has, for now, settled-in at 4.5%. What appears to support the hold pattern is that StatsCan reported that Canada’s inflation rate fell to 4.3% in March, down from 5.2% in February. And inflation is expected to continue the downward trajectory to hit 3% by mid-year.

After an expected quarter point bump in March, the U.S. Federal Reserve bumped their Benchmark Rate up again on May 3rd, this time by another quarter of a percentage point to the range of 5.0%-5.25%. Current signals seem to indicate that the U.S. Fed could be prepared to pause rates south-of-the-border as well, as it continues to evaluate economic indicators.

Good news here at home as we don’t want our rates to get too far out of sync. Historically, our economy seems to be able to handle an interest rate spread of up to a full percentage point. A larger spread and our Loonie weakens as the U.S dollar strengthens, which means global purchasing power drops. And as things get more expensive to import, prices may climb… and there’s a bump in inflation again.

Right now, economic signals seem to suggest that the Bank of Canada is on a path to achieving economic moderation without a recession. And the rate-hold could see downward pressure on lending rates in the months to ahead. The next BoC announcement comes on June 7th. I will keep you updated.