Bank of Canada will maintain current level of policy rate until inflation objective is achieved, continues its quantitative easing program
Christine MacPherson • December 11, 2020
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.
The rebound in the global and Canadian economies has unfolded largely as the Bank had anticipated in its October Monetary Policy Report (MPR). More recently, news on the development of effective vaccines is providing reassurance that the pandemic will end and more normal activities will resume, although the pace and breadth of the global rollout of vaccinations remain uncertain. Near term, new waves of infections are expected to set back recoveries in many parts of the world. Accommodative policy and financial conditions are continuing to provide support across most regions. Stronger demand is pushing up prices for most commodities, including oil. A broad-based decline in the US exchange rate has contributed to a further appreciation of the Canadian dollar.
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The news from Ottawa is clear: the Bank of Canada has decided to hold the policy rate at 2.25%. While many of us were hoping for a spring rate cut to spark some excitement in the market, the recent spike in inflation to 2.4% - largely driven by global oil price volatility - has forced the Bank to play it safe. The "Wait-and-See" Trap If you've been sitting on the sidelines in Edmonton or Calgary waiting for the "perfect" time to buy or renew, you aren't alone. However, waiting for a massive rate drop that may not arrive until 2027 is a risky game. Even as the Bank of Canada holds steady, our local real estate inventory remains tight. When rates eventually do move down, the floodgates of pent-up demand usually open, driving home prices up and wiping out any savings you gained from a slightly lower interest rate. Navigating the 2026 Renewal Shock For those of you with mortgages coming up for renewal this month, the landscape looks very different than it did five years ago. The Reality: If you secured a rate under 2% in 2021, you are likely looking at a new reality closer to 4% or 5%. The Strategy: We are looking at "short-term fixed" options. A 2 or 3-year fixed term allows you to ride out this current volatility without being locked in for a full five years at today's rates. Key Economic Indicators for May 2026 Policy Interest Rate - 2.25% (Hold): Variable rates stay steady. Inflation (CPI) - 2.4%: Keeps downward rate pressure at bay. 5-Year Bond Yields - ~3.0%: Keeps fixed rates in a tight range. Stop Guessing, Start Planning You don't need a crystal ball to make a smart move in Edmonton and Calgary - you just need a solid plan. Whether you are a first-time buyer or an investor looking to increase your portfolio, let's look at your numbers today. Contact me today at 403-968-2784 or email christine@flaremortgagegroup.com to review your renewal or pre-approval.
When most people think about mortgage rates in Canada, they think about inflation here at home, jobs here at home, and Bank of Canada announcements. Those things absolutely matter. But global events matter too, and right now they matter a lot. On March 18, 2026, the Bank of Canada held its policy rate at 2.25 percent and made it clear that the war in the Middle East has increased volatility in energy prices and financial markets, while raising risks for the global economy. Global News also reported that policymakers are watching the conflict closely because higher oil, transportation and fertilizer costs could spill into inflation and affordability pressures for Canadians. This matters if you are buying, refinancing, renewing, or simply trying to decide whether to lock in a rate. In my view, the real story is not just that Canada held rates steady. The bigger story is that global pressure can quickly change where mortgage rates go next, even when nothing dramatic has changed in your own neighbourhood. Why a war far from Canada can affect your mortgage Canada does not set mortgage rates in a bubble. The Bank of Canada said the conflict has driven sharp increases in global oil and natural gas prices, and that it could also disrupt the movement of other commodities, including fertilizer, through transportation bottlenecks linked to the Strait of Hormuz. Governor Tiff Macklem added that while Canada is not hit directly in the same way as some regions, reduced global supply still means higher global prices. That is the kind of pressure that can make inflation harder to control. When inflation risks rise, central banks get cautious. That does not always mean an immediate rate hike, but it can mean fewer cuts, longer holds, or tougher language. That is exactly why this latest Bank of Canada announcement matters. The Bank held, but it also signaled that the outlook is more uncertain and that it is prepared to respond as conditions evolve. What this means for variable mortgage rates If you have a variable rate mortgage, the Bank of Canada is still the main thing to watch. Variable rates in Canada are closely tied to lender prime rates, and prime typically moves when the Bank changes its overnight rate. As of March 27, 2026, Canada’s prime rate is 4.45 percent, and Ratehub notes that variable mortgage rates have remained stable following last week’s rate hold. So, for now, borrowers with variable rates have not seen a fresh jump just because of the war. But the risk has changed. If global conflict keeps energy prices elevated and inflation proves harder to cool, future cuts may be delayed. In plain English, this means some borrowers who were hoping for lower payments later this year may need to prepare for a longer period of higher borrowing costs than expected. That is not a certainty, but it is a reasonable takeaway from the Bank’s current tone. Variable rate borrowers should focus on payment room If you are in a variable rate mortgage right now, this is a good time to review your budget honestly. Ask yourself whether your payment still feels comfortable if rates stay where they are for longer. A lot of borrowers were planning around future relief. The new global backdrop is a reminder that relief can get delayed very quickly. What this means for fixed mortgage rates Fixed rates are a little different. They are not priced directly off the Bank of Canada’s overnight rate. TD explains that fixed mortgage rates are based on the bond market, with Government of Canada bond yields used as a benchmark. Ratehub now says the ongoing conflict in the Middle East and the shrinking likelihood of central bank cuts are pushing bond yields higher, and that fixed mortgage rates increased significantly this week. That distinction is important. Even if the Bank of Canada does nothing at its next meeting, fixed rates can still move. If investors keep pricing in higher inflation risk, lenders can raise fixed mortgage pricing before the Bank ever changes its policy rate. For buyers and renewing homeowners in Edmonton, that means waiting can carry a real cost. What buyers and homeowners in Edmonton should do now I think this is a planning market, not a panic market. The latest data does not say every borrower should rush into the same product. It does say that global events are now part of the mortgage conversation again, and ignoring them is a mistake. If you are buying, get pre approved and secure a rate hold while you shop. Ratehub notes that current pricing can often be held for up to 120 days, which can be valuable in a market where fixed rates are moving. If you are renewing, compare your options early instead of waiting for the lender’s first offer. If you are refinancing, think beyond rate alone and look at cash flow, penalty costs, and how much payment certainty matters to you right now. The bottom line The Bank of Canada did not raise rates in March. But the global pressure behind mortgage rates is clearly building. War driven energy shocks can feed inflation. Inflation pressure can keep central banks cautious. Cautious central banks and rising bond yields can keep mortgage costs higher for longer. That is the chain Canadians need to understand right now. If you want to talk through your options in Edmonton, I am happy to help you compare fixed and variable strategies based on your timeline, budget, and risk comfort. Call 403-968-2784 or email christine@flaremortgagegroup.com to start the conversation.
