Canadians will need to wait a bit longer for a break from the national bank.
On Wednesday, the Bank of Canada announced its decision to hold the overnight rate at five per cent, citing its policy of “quantitative tightening.” However, the Bank did acknowledge that a rate cut in June is “within the realm of possibilities.” This is the sixth time in a row that the Bank has decided to hold the rate.
What this currently means for the Canadian housing market remains to be seen. The seasonal effect of the arrival of spring drives both buyers and sellers into activity. Will this latest hold put a damper on the market bouncing back into action? A strong demand combined with higher housing prices may continue pushing inflation higher, delaying a future rate cut.
“Inflation will continue to come down”
However, Bank of Canada governor Tiff Macklem said Wednesday that recent data has given the central bank more confidence that “inflation will continue to come down gradually even as economic activity strengthens.”
“Our key indicators of inflation have all moved in the right direction,” Macklem said.
Canada experienced a slowdown in economic growth during the latter part of last year. Various indicators point to a gradual decline in labour market conditions. The employment growth rate has been outpaced by the increase in the working-age population, resulting in a gradual rise in the unemployment rate, which reached 6.1 per cent in March, but there are indications that wage pressures are starting to ease.
Meanwhile, experts predict a surge in economic growth by the end of 2024. The increase can be attributed to the significant rise in population and the resurgence of household spending. Housing demand continues to drive a strong resurgence in residential investment.
Government spending has also seen an increase in its contribution to economic growth. Business investment is expected to gradually recover following a significant decline in the latter part of the previous year.
