Why Market-Watchers Are Split on Interest Rate Predictions

Wahi asked real estate industry professionals — including economists, academics, and REALTORS® — about their predictions for the Bank of Canada’s next rate announcement.

By Josh Sherman | 3 minute read

The overnight rate is the Bank of Canada’s main tool for controlling inflation — read our explainer to find out how.

Market-watchers are split on whether the Bank of Canada will embark on another rate cut on April 16.

So suggests an informal Wahi survey of a dozen real estate industry professionals, including economists at some of Canada’s biggest banks as well as academics and analysts. Respondents to Wahi’s latest Rate Outlook Panel were asked whether they anticipate a rate cut — and, if so, by how much — as well as the reasoning behind their decision.

Overall, half (six out of 12) of respondents predict the central bank will hold the key policy rate at 2.75% on Wednesday, with the remaining six anticipating a cut of 25 basis points. These results present a murkier outlook than Wahi’s inaugural Rate Outlook Panel from March, when just under two-thirds of respondents accurately predicted a rate cut.

This time around, whether market-watchers anticipated a hold or a reduction, the unpredictable nature of trade relations between Canada and the U.S. loomed large in their responses. 

CIBC Deputy Chief Economist Benjamin Tal was in the latter camp, calling for a cut “because of the slowdown of the economy due to tariffs… and the uncertainty regarding tariffs.” 

Daniel Foch, chief real estate officer at Valery.ca, put it more bluntly. “[The] economy is really messed up… Canadians are still highly indebted and we need the cost of capital to come down for the economy to be able to weather this economic storm of the trade war,” he tells Wahi.

Amid rising risks of stagflation — that is, a mixture of high inflation, economic stagnation, and higher unemployment — Penelope Graham, mortgage expert and director of content at Ratehub.ca, suggests the BoC will throw Canadians another life line in the form of a cut. “I think the BoC will pass on a cut next week to give Canadians some relief amid the market turmoil, and give them more financial ammunition to weather what’s to come,” says Graham.

Already, the economy is showing signs of weakness. In March, Canada lost 33,000 jobs, the first monthly decline since January 2022, according to Statistics Canada. “Weak job numbers alone support [a cut],” writes Peter Norman, chief economist at the Altus Group, in his panel response. “It’s a cautionary cut as I’m sure the Bank will be conscious of the impacts on the [Canadian dollar], but on balance expect the cut,” he adds.

Echoing Norman’s remarks in anticipation of a cut, Wayne Kainu, head of mortgages at Neo Financial, also points to the latest labour-market data: “While the Canadian economy has shown resilience, March’s jobs report painted a different picture.”

The Case Against Cuts

Among respondents poised for the BoC to stay on the sidelines, more than one noted that the Trump administration appears to be walking back some of its toughest tariff talk. “Trump seems to be de-escalating on tariffs with Canada and they likely want to see if this goes away before taking further action,” says Alex Leduc, founder and CEO of Perch Mortgages. “If tariffs do persist, it’s unclear that higher inflation expected from tariffs would overshadow a negative economic outlook.”

Jocelyn Paquet, an economist at National Bank, agrees that somewhat softer trade talk from south of the border should help encourage a hold. “The slight de-escalation in the trade war, which has raised hopes of a continuation of the global economic expansion, makes this scenario more likely in our view,” writes Paquet.

However, Paquet suggests continually weaker economic numbers will weigh on the central bank, spurring more cuts beginning as soon as June. “The central bank may not stay on the sidelines for long,” Paquet adds.

Shawn Woof, sales representative and senior vice president at Sotheby’s International Realty Canada, is another respondent who says the BoC will want to see more data before acting. “Rather than moving forward with immediate rate cuts, the Bank may adopt a ‘wait-and-see’ stance to better assess the impact of these factors before taking further action.”