Canada Prime Rates

The Prime Rate declined to 6.7% as the Bank of Canada reduced the policy rate by 25 basis points to 4.5%.

Inflation reached 2.7% in June 2024, down from a multi-decade high of 8.1% in June 2022. It is still higher than the Bank of Canada's (BoC) 2% target, but it is heading in the right direction. Therefore, the BoC is bringing its policy rate toward the neutral rate.

The Bank of Canada lowered its policy rate as it believes that the soft landing of the Canadian economy is achieved:

• If we annualize the seasonally adjusted 9-month inflation between September 2023 and June 2024, we arrive at a rate of 2.5%.
• Also, annualized inflation over the past three months was 4%.
• The unemployment rate has risen from 5% at the beginning of 2023 to 6.4%.
• Excess demand is no more, and once again, the Canadian economy is in excess supply of goods and services.

The prime rate rose from 2.45% in March 2022 to 7.2%, its highest level over the past 22 years. After almost one year at 7.2%, it went down to 6.7% over the past two months. As inflation is heading to the target and as the largest contributor to inflation is shelter, whose shortage cannot be resolved by monetary policy, the prime rate is heading down.

The Prime rate in Canada is currently 6.70%. The Prime rate is the interest rate that banks and lenders use to determine the interest rates for many types of loans and lines of credit. These can include credit cards, HELOCs, variable-rate mortgages, car and auto loans, and much more. If you have any of these loans, changes in the prime rate will also change your debt payments and thus your GDS and TDS ratios.