Bank of Canada announces 4th Consecutive Rate Hold at 5.0%
On January 24th, 2024 the Bank of Canada has announced the overnight lending rate hold at 5.0%. This is the fourth consecutive rate hold. The next scheduled interest rate announcement is March 6, 2024.
However major housing markets across the country have already reported an uptick in buying and selling activity since the start of the year.
In its latest quarterly Home Price Update, Royal LePage predicted that the market would begin to rebound in the first quarter of 2024, even before a cut to interest rates is made.
According to the Bank of Canada:
Global economic growth continues to slow, with inflation easing gradually across most economies. While growth in the United States has been stronger than expected, it is anticipated to slow in 2024, with weakening consumer spending and business investment. In the euro area, the economy looks to be in a mild contraction. In China, low consumer confidence and policy uncertainty will likely restrain activity. Meanwhile, oil prices are about $10 per barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have eased, largely reversing the tightening that occurred last autumn.
The Bank now forecasts global GDP growth of 2½% in 2024 and 2¾% in 2025, following 2023’s 3% pace. With softer growth this year, inflation rates in most advanced economies are expected to come down slowly, reaching central bank targets in 2025.
In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024. Consumers have pulled back their spending in response to higher prices and interest rates, and business investment has contracted. With weak growth, supply has caught up with demand and the economy now looks to be operating in modest excess supply. Labour market conditions have eased, with job vacancies returning to near pre-pandemic levels and new jobs being created at a slower rate than population growth. However, wages are still rising around 4% to 5%.