Did the Bank of Canada say interest rates would stay low?

Yes. In July 2020 Governor Tiff Macklem said rates were going to be low for a long time, and in October 2020 the Bank held the policy rate at 0.25 percent with guidance that it would likely remain there until 2023.

What actually happened to Canadian interest rates?

The Bank began raising in March 2022 and delivered ten increases in sixteen months, taking the policy rate from 0.25 percent to 5.00 percent by July 2023. It has since fallen back to 2.25 percent.

Should I make a mortgage decision based on Bank of Canada guidance?

Use it as information, not as a promise. Guidance describes what the Bank expects under current conditions, and conditions changed faster than anyone forecast. Stress test your own payment against a materially higher rate rather than the guided one.

Was the Bank of Canada wrong to give that guidance?

The Bank changed course because inflation arrived far faster than its forecasts anticipated, which is a defensible reason to change policy. The fair criticism is not that it changed its mind, it is that the guidance was stated plainly enough for households to plan twenty-five year decisions around a two-year outlook.

The Receipts: The Bank of Canada Said Rates Would Stay Low. Then Came 5%

Last updated: August 2026

In 2020 the Bank of Canada told Canadians that interest rates were going to be low for a long time, and that the policy rate would likely stay at 0.25% until 2023. Rates began rising in March 2022 and reached 5.00% by July 2023, ten increases in sixteen months. If you bought at the peak of the market believing borrowing costs were safely parked, you were not being reckless. You were listening to the central bank.

This one is different from the rest of the series. The first three scored calls made on my own podcast. This scores the institution whose guidance shaped what millions of Canadians could borrow.

Simeon Papalias describing how Bank of Canada guidance shaped the financial decisions households made in 2020 and 2021, on the Supply and Demand podcast

What Was Actually Said

The guidance

Interest rates are going to be low for a long time.

When

July 2020, shortly after Tiff Macklem became Governor.

What happened

The Bank began raising in March 2022, twenty months later.

Verdict

Wrong, and consequentially so. Twenty months is not a long time when the decision it informed was a twenty-five year amortisation.

The guidance

The policy rate would be held at 0.25% and likely remain there until 2023.

When

October 2020 policy statement.

What happened

Ten increases in sixteen months took the rate from 0.25% to 5.00% by July 2023.

Verdict

Wrong. The rate did not merely leave the lower bound before 2023, it was nearly at its peak by then.

Why this guidance was unusual

Central banks routinely publish forecasts. What made this different was how plainly it was addressed to ordinary households rather than to bond traders, and how directly it invited people to plan around it. That is the part worth remembering, not the forecast error itself.

Being Fair to the Bank

I do not think this was dishonesty, and I am not interested in writing the conspiratorial version.

Inflation arrived faster and harder than essentially anyone forecast, driven by supply shocks and an energy price spike that no 2020 model contained. A central bank that sees inflation running away and does not change course is a worse central bank. Changing your mind when the facts change is the job.

“Our governor goes on TV to say to people, don’t worry, you can make your biggest financial decisions knowing that the Bank of Canada is not going to move.”

— Simeon Papalias, on the podcast, July 2025

The fair criticism is narrower than “they lied”, and it is this: a two-year outlook was communicated in language households used to make twenty-five year commitments. The Bank was speaking about its expectations. A lot of people heard a promise.

Line chart of the Bank of Canada overnight rate held at 0.25 percent through 2020 and 2021 under guidance it would stay low until 2023, then rising to 5.00 percent by July 2023

The Scorecard

Guidance	Given	What happened	Verdict
Rates low “for a long time”	July 2020	Hiking began March 2022	Wrong
0.25% likely held until 2023	Oct 2020	5.00% by July 2023	Wrong
Ten increases in sixteen months	Mar 2022 – Jul 2023	0.25% to 5.00%	The actual path
Where it sits now	Aug 2026	2.25%, held six consecutive decisions	Current

Who paid for the gap

People who bought in 2021 and early 2022 on variable rates, and people who took the largest mortgage their qualification allowed. The stress test protected many of them from default, but it did not protect them from a payment that rose while the value of what they bought fell. That combination is the entire pre-construction closing problem now playing out.

What I Actually Take From This

Treat guidance as information, never as a promise. It describes expectations under current conditions, and conditions move.
Stress test your own payment past the official test. Ask what your payment looks like several points higher, and whether you would still sleep. If the answer is no, borrow less.
Match the horizon of the advice to the horizon of the decision. A two-year outlook should not be load-bearing in a twenty-five year commitment.
And keep the criticism proportionate. They were wrong, badly and expensively. They were not lying, and a bank that refuses to change course when inflation arrives would have cost you more.

The series pattern, again

Across four of these now, the same thing keeps showing up: confident language about the future ages worst. The Bank’s numbers were a forecast. The sentence “you can make your biggest financial decisions” was the part that did the damage.

Simeon Papalias on the market reset that followed the Bank of Canada's rate increases

Where This Came Up

Apple Podcasts
Spotify
YouTube

Frequently Asked Questions

Did the Bank of Canada say rates would stay low?

Yes. In July 2020 Governor Tiff Macklem said rates were going to be low for a long time, and in October 2020 the Bank held at 0.25% with guidance that it would likely stay there until 2023.

What actually happened?

Hiking began in March 2022, with ten increases in sixteen months taking the policy rate from 0.25% to 5.00% by July 2023. It has since fallen back to 2.25%.

Should I plan a mortgage around Bank of Canada guidance?

Use it as information, not a promise. Stress test your payment against a materially higher rate than the guided one and borrow accordingly.

Was the Bank wrong to change course?

Changing course when inflation arrives is the job. The fair criticism is that a two-year outlook was communicated plainly enough for households to build twenty-five year decisions on it.