For a variety of reasons, it’s going to be a while before new-vehicle sales feel the effect of the Bank of Canada’s latest interest rate hike, says Charles Bernard, lead economist at the Canadian Automobile Dealers Association.
The Bank of Canada on Wednesday raised its key interest rate to 4.5 per cent, the highest it's been since 2007.
The central bank raised its key interest rate by a quarter of a percentage point this week, marking the eighth consecutive hike since March in the face of decades-high inflation. Shahin Alizadeh, the CEO of the Downtown Auto Group in Toronto, recently told Automotive News Canada that inventories are “normalizing and improving for some brands.” He said Detroit Three inventory, for example, “is much less of an issue.”Bernard said rate hikes, consumer cash on hand left over from the pandemic, high transaction prices, the threat of a recession and varying inventories across brands have consumers “confused” about when and where to spend their money.
“Consumers don’t really know what to think,” he said. “The market is hard to read because consumers don’t really know where the economy is going.” If economic developments stay in line with its current projections, the central bank said it expects to hold its key interest rate of 4.5 per cent at its current level.
The Bank of Canada also published its latest monetary policy report Wednesday, providing updated projections for the economy and inflation.
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