Canada Prime Rates

The Prime Rate declined to 5.2% after the Bank of Canada reduced its policy rate by 25 basis points to 3%.

Annual inflation was 1.8% in December 2024, down from a multi-decade high of 8.1% in June 2022. Economic weakness and oversupply are driving inflation lower, with headline inflation falling below the Bank of Canada’s (BoC) 2% target in three of the last four months. However, core inflation remains above target, with the BoC’s preferred measure sitting at 2.5%. In response, the BoC is lowering its policy rate toward the neutral rate in an effort to engineer a soft landing for the Canadian economy.

The Bank of Canada lowered its policy rate again

• Since Canada is facing the possibility of an unprovoked trade war with its largest trading partner, the resulting economic uncertainty and potential export losses could push the Canadian economy into a recession.
• Reduced trade activity, weaker business confidence, and potential job losses may further dampen growth, making the outlook increasingly fragile.
• Thus, the Bank of Canada (BoC) may need to lower its policy rate into a stimulative range over the coming months to counteract the economic slowdown. If trade tensions escalate and recession risks materialize, the BoC could accelerate rate cuts to support growth, encourage borrowing, and stabilize employment

The Bank of Canada lowered its policy rate again and announced an end to quantitative tightening set for early March, signaling a shift toward more accommodative monetary policy amid rising economic uncertainties.

The Prime rate in Canada is currently 5.20%. 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.