Real Estate Blog

Today, the Bank of Canada maintained its overnight rate target at 5%, with corresponding rates for the Bank Rate at 5.25% and the deposit rate at 5%. They are continuing with their quantitative tightening approach.

Globally, economic growth is slowing down, and inflation is gradually decreasing in most areas. The U.S. economy has been unexpectedly robust, but a slowdown is expected in 2024 due to reduced consumer spending and business investment. 

For 2024 and 2025, the Bank predicts global GDP growths of 2.5% and 2.75%, respectively, following a 3% growth in 2023. Slower growth this year should lead to a gradual decline in inflation rates in advanced economies, aligning with central bank targets by 2025.

In Canada, economic growth has been stagnant since mid-2023, and it's expected to hover around zero until the first quarter of 2024. High prices and interest rates have led consumers to cut back spending, and business investment has also decreased. The economy is now slightly exceeding supply, and the job market has relaxed, with job vacancies close to pre-pandemic levels and slower job creation compared to population growth. However, wages are still increasing by about 4-5%.

Economic growth in Canada is expected to pick up from mid-2024, with household spending and exports and business investment improving in the second half of the year due to increased foreign demand. Government spending will also significantly contribute to growth. The Bank forecasts GDP growths of 0.8% for 2024 and 2.4% for 2025, consistent with their October predictions.

Given these factors, the Governing Council chose to keep the policy rate at 5% and continue balancing the Bank's books. The Council remains wary of inflation risks, especially the persistence of underlying inflation. They are looking for more consistent decreases in core inflation and continue to monitor the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behavior. The Bank is firmly committed to restoring price stability for Canadians.

If you have any questions about mortgage rates, buying, selling or general inquiries about the value of your home - book a chat with us!