PODCAST. While the Bank of Canada’s decision to keep its key interest rate stable at 5% on September 6 was widely expected, the institution’s management made clear it remains committed to bringing inflation back to its 2% target.

This means that it could raise its key interest rate again if necessary.

Nicolas Vaugeois, portfolio manager at Fiera Capital, claims the announcement had virtually no impact on bond markets. “What we are currently seeing is a series of corporate bond issuances in the United States that are unrelated to the Bank of Canada announcement. We’re talking about emissions totaling $60 billion since the return from the long Labor Day holiday,” he says.

Coming back to the Bank of Canada’s key interest rate, Nicolas Vaugeois believes the Bank of Canada will remain on the sidelines until at least the second half of 2024, suggesting interest rates will remain “higher for longer.” “But we only have a 50% probability,” he specifies.

The Canadian central bank’s next interest rate decision will be announced on October 25 and the portfolio manager believes that the economic data released by then will be crucial.

If many economists expect the Bank of Canada to take a lengthy pause before cutting its key interest rate, does that mean households nearing their mortgage renewal should prioritize variable-rate loans again? Nicolas Vaugeois believes it all depends on the ability of households to absorb the blow in the event of further increases in the coming months. “If I had to renew my mortgage at the end of next year, I would choose a variable rate,” he says.