The Bank of Canada is widely expected to leave interest rates unchanged at 2.25 per cent when it convenes next week, as the central bank navigates diverging economic trends.<\/p>\n
The BoC faces a sluggish economy that would call for a rate cut, while continuing inflation risks may require an interest-rate hike, said Clay Jarvis, a mortgage and financial expert with NerdWallet Canada. <\/p>\n
\u201cThe opposing nature of Canada\u2019s current economic maladies explains why the bank\u2019s likely to continue holding the overnight rate on July 15,\u201d Mr. Jarvis said.<\/p>\n
\u201cTreating one condition could exacerbate the other, so it looks like the bank will go the \u2018do no harm\u2019 route and maintain the overnight rate.\u201d<\/p>\n
The BoC interest rate has remained unchanged since October, when the bank delivered a quarter-point rate cut. Variable-rate mortgages, which are directly influenced by monetary policy, have remained stable during that period.<\/p>\n
Bond swaps markets, which capture investor sentiment around monetary policy, have largely priced in expectations of a rate hold next week, according to Bloomberg data. However, investors are predicting that a rate hike could be in store before the end of the year. <\/p>\n
Meanwhile, long-term fixed mortgage rates have hovered around the 4-per-cent mark since the conflict in Iran began. The war and its ensuing impact on oil prices put upward pressure on bond yields, which in turn made fixed mortgages more expensive. <\/p>\n