Canada Housing Market

In September, Canada’s inflation rate dropped to 1.6%, the lowest it’s been since February 2021. This decrease is mainly due to falling gas prices and is raising hopes that the Bank of Canada will cut interest rates to help boost the economy.

Many economists are now predicting that at the Bank of Canada’s next meeting on October 23, they will make a significant cut to the interest rate—possibly by 50 basis points (0.50%). This could help kickstart Canada’s sluggish economy.

Why Experts Expect a Rate Cut

For the past three meetings, the Bank of Canada has slowly lowered its key lending rate by 25 basis points each time. After aggressively raising rates 10 times between March 2022 and mid-2023 to control inflation, it now looks like the Bank is shifting gears.

With inflation now well below the Bank’s target of 2%, experts believe it’s time for a bigger rate cut to give the economy a boost. According to BMO’s chief economist, Douglas Porter, the combination of low inflation, high unemployment, and weak consumer confidence suggests the Bank of Canada could cut rates by 50 basis points.

What Does This Mean for You?

A potential rate cut would mean lower borrowing costs, which could benefit both businesses and consumers. For example, the real estate market could see a boost, with the Canadian Real Estate Association predicting a 9.9% increase in Ontario home sales next year.

Lower interest rates would make borrowing cheaper for things like mortgages and business loans, giving the economy the push it needs to stabilize. Some experts believe the Bank may have raised rates too much earlier, and now it’s time to reverse course.

As we approach the Bank of Canada’s October meeting, all eyes are on whether they will make the predicted 50-basis-point cut—and what that could mean for the Canadian economy going forward.

Source: Inflation falls to 1.6 per cent in September (thestar.com)