As expected the Bank of Canada kept its overnight rate at the same level. They did however comment on the strong possibility of future rate increases based on global and Canadian inflationary pressures. These pressures are being largely driven by higher energy and food prices.

The Bank of Canada is projecting core inflation returning to the two percent target level in the foreseeable future. If that happens, the Bank of Canada has made it clear they will be withdrawing some of their financial stimulus which will result in a higher bank prime. We can expect this to happen in the next six to twelve months. The overall report is cautionary due to the containment of the global debt crises and the soft U.S economy.

At this point variable rate mortgages remain an extremely attractive option for those with the toleration for risk.

The next Bank of Canada Announcement is scheduled for September 7, 2011 

Bank prime is 3.0%

P.S. If you have any questions as to what this means to your mortgage, we are always here to help you with unbiased advice.