Good news for mortgage holders and homeowners as Bank of Canada holds interest rates at 4.5%

Homeowners and mortgage holders in Canada heaved a sigh of relief as The Bank of Canada kept interest rates unchanged for the first time in nine meetings and said it’s still weighing whether additional hikes will be needed to rein in inflation.

Policymakers led by Governor Tiff Macklem made good on a January pledge to hold the benchmark overnight rate at 4.5%, the first pause among major central banks that was expected by both markets and economists. Officials kept the door open to more hikes, however, reiterating that they’re willing to raise borrowing costs again if necessary.

“Governing Council will continue to assess economic developments and the impact of past interest rate increases and is prepared to increase the policy rate further if needed to restore inflation to the 2% target,” the bank said in a statement-only decision Wednesday.

The stay-the-course message suggests officials are comfortable sticking to the sidelines for now, confident their aggressive tightening over the past year will keep dragging on economic growth and bring inflation to heel. That’s at odds with the US Federal Reserve, which is signaling further hikes to come.

The Bank of Canada’s communications also highlighted officials’ views on recent developments in the domestic economy, including a “very tight” labor market and measures of price pressures and inflation expectations that “need to come down further.”

In sum, the statement suggests the Bank of Canada sees the economy evolving as expected in its January forecasts. “Overall, the latest data remains in line with the bank’s expectation that CPI inflation will come down to around 3% in the middle of this year,” policymakers said.

Output stalled at the end of last year as businesses pared down inventories, though a rebound in consumption and household spending points to continued resilience among Canadian consumers, despite their large debts. The jobs market is hot, and most economists see a soft landing as the base-case scenario. Housing prices have fallen 15% since their peak early last year — but there are now signs of recovery.

Mortgage rates in Canada have spiked to over 7% in the last 12 months, leaving many homeowners in despair. For now, they can afford to take a breather.