In a recent move by the Bank of Canada (BoC), the central bank has chosen to maintain its policy interest rate at 5%. This decision marks the second consecutive rate pause, reflecting the challenges of mounting affordability concerns and lackluster economic performance, a topic of great significance for real estate enthusiasts.
The BoC elaborated on its decision, stating, “With evident indications that monetary policy is tempering spending and alleviating inflationary pressures, the Governing Council has opted to keep the policy rate at 5% while continuing to normalize the Bank’s balance sheet.”
The anticipation leading up to this announcement was met with little surprise, as the majority of economists had forecasted that the central bank would refrain from raising interest rates. This outlook was substantiated by several factors, including a moderation in Canada’s inflation rate to 3.8% in September, edging it closer to the BoC’s 2% target. Additionally, there has been a decline in demand, particularly within the housing market, with sales decreasing across major markets.
The BoC’s official statement underscored the impact of previous interest rate hikes on economic activity and their role in mitigating price pressures: “In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures.”
Nevertheless, it is essential to note that the BoC has expressed its vigilance, stating that the Governing Council is concerned about the gradual progress towards price stability and heightened inflationary risks. The central bank stands ready to increase the policy rate further if circumstances necessitate it.
The BoC emphasized its continued focus on various economic indicators, including core inflation trends, the equilibrium between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior.
The next rate announcement is scheduled for December 6, providing an opportunity to gauge the ongoing economic landscape and its implications for real estate in Canada. Stay tuned for more insights and updates in the coming months.
