OTTAWA — Forecasters expect the Bank of Canada to speed up the pace of interest rate cuts and lower its policy rate by half a percentage point this week.
The central bank's interest rate announcement on Wednesday comes after Statistics Canada reported the annual inflation rate in September tumbled to 1.6 per cent — below the Bank of Canada's two per cent inflation target.
After the Bank of Canada's interest rate cut last month, governor Tiff Macklem signalled that the central bank will be ready to cut rates more aggressively if inflation falls by too much.The Bank of Canada has lowered its key interest rate three times so far, bringing it down to 4.25 per cent. Although the Canadian economy has continued to grow modestly, real gross domestic product has shrunk on a per-capita basis for five consecutive quarters.
Carl Gomez, chief economist at real estate data company CoStar, said real interest rates in Canada — which are adjusted for inflation — are much higher than in other countries, putting more downward pressure on the Canadian economy. The Bank of Canada's interest rate cuts were expected to stimulate activity in the housing market again, raising fears that inflation could rebound."It's turned into more of a buyer's market, which is still pulling house prices down; not allowing them to continue to move up as they had been pre-pandemic," Gomez said.
"Interest rates are falling, but labour markets are also softening at the same time, so we're not expecting the same kind of a jump in housing market activity as you might normally expect if interest rates were falling when the unemployment rate was low," Janzen said.
Unemployment Rate Statistics Canada Interest Rate Policy Rate The Central Bank Inflation Rate
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