The Bank of Canada held interest rates at 5 per cent on Wednesday, meeting almost all expert forecasts. Economists have also forecast that Canadian homeowners may need to wait until the summer at least until the financial pressure eases. However, despite the short term not looking much better, there’s plenty of reason to look forward to the future.
This is the fifth consecutive time that Canada has maintained rates as the battle with inflation continues. The Bank of Canada has made it clear in the past that rates will not fall until they are confident inflation is under control.
Although this news was expected by many, many economists have been forced to revisit their forecasts for the coming months. It was widely believed that Canadians will see the first cut in April, although experts are now saying July is more likely.
Director of Macro Strategy at Manulife Investment Management, Dominique Lapointe, pointed out the bank’s acknowledgement that wage pressure might be lifting. Lapointe went on to add that the economic forecast for the first half of 2024 is not rosy, and that economic performance will play a big impact on the central bank’s decision.
A representative from NerdWallet Canada, Shannon Terrell, has echoed forecast of a rate cut some time on the summer. She also pointed out that the central has to play a balancing act of trying to lift the economy without driving inflation.
IG Wealth Management Assistant Vice-President, Ashish Utarid, repeated a similar sentiment, saying he expects the Bank of Canada to begin cuts “in the near future”. He pointed to signs of recent economical slow which will increase pressure on the bank to reduce rates. He also added that the bank is proceeding with caution as they continue to wrestle with high inflation levels.
Deloitte Canada Chief economist, Dawn Desjardins, was also predicting that the Bank of Canada will cut rates in July. She added that while we are not there yet, we are getting there as conditions make the bank more likely to start dropping rates.
While recent developments have dampened hopes of mortgage relief in the short term, the longer term signals look healthier. Rate drops are expected this year, provided the bank feels comfortable in doing so.
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