Here’s Where Market-Watchers Say Canadian Interest Rates Are Headed This Spring

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

Leading up to each scheduled BoC rate announcement, Wahi surveys upwards of a dozen real estate leaders to gauge market sentiment and find out where the industry thinks rates are headed.

Top economists are banking on Canadian interest rates remaining the same — for now.

That’s one takeaway from Wahi’s latest Rate Outlook Panel, which suggests market-watchers broadly expect that the Bank of Canada will continue to hold its overnight rate at 2.25% at its upcoming rate announcement slated for this Wednesday.

In the days leading up to each rate announcement, Wahi surveys upwards of a dozen real estate industry professionals, including economists at some of Canada’s biggest banks as well as academics, analysts, and top realtors. Respondents to Wahi’s Rate Outlook Panel are asked whether they anticipate a rate cut — and, if so, by how much — as well as the reasoning behind their decision.

The unanimous expectations for a cut this time around echo the panel response ahead of the last meeting, in March.

As far as Benjamin Tal, CIBC’s deputy chief economist, is concerned, the data doesn’t support rising rates. “Economic activity [is] way too weak to justify a hike,” says CIBC Deputy Chief Economist Benjamin Tal. On the flipside, the rising costs of goods and services should curtail any plans for a rate reduction. “Inflation will prevent a cut,” Tal continues.

Generally, the Bank of Canada will trim rates to encourage economic activity during periods of stagnation. Conversely, policymakers increase rates to rein in higher-than-desired inflation (the central bank targets a rate of inflation between 1% and 3%). 

The current economic conditions are a “push-pull” between higher inflation from rising gas prices and softer employment, says Pauline Lierman, vice president of market research at Zonda Urban. “The same tensions seem to be ongoing at each rate review interval.”

Although there’s plenty of economic uncertainty circulating, Robert Hogue, RBC’s assistant chief economist, suggests there are some indications of stability that support a hands-off approach from the central bank this week. “Since the last meeting where the BoC sounded concerned on growth, the labour market has stabilized, Q1 GDP is tracking close to their forecast, the Business Outlook Survey had a slightly more upbeat tone, and financial conditions have loosened,” says Hogue. “The latest core inflation prints were neutral after four straight low months,” he adds. 

While Ethan Currie appears to have a less-rosy framing of the situation, he, too, was among the experts Wahi spoke to who predict monetary policymakers will keep their fingers on the pause button. “Growth has been weaker-than-expected, and job market performance has remained sluggish, which pushes back on a case to immediately tighten policy in response to the oil price shock,” says Currie.

In Shawn Woof’s survey response, the sales representative and senior vice president at Sotheby’s International Realty Canada

“I anticipate a continued pause on the overnight rate until things settle,” he says. “On the positive side, rates are currently historically attractive and many opportunities exist in the real estate market today,” Woof adds.

Moshe Lander, a senior economics lecturer at Concordia University, says the BoC doesn’t need to be in any rush to make a move with inflation sitting at 2.4% as of March, according to Statistics Canada’s Consumer Price Index, which measures the cost of goods and services over time. “Inflation will creep up in April as the elimination of the carbon tax last year falls out of the 12-month calculation and because of increased price pressure due to the closure of the Strait of Hormuz, but the decision to suspend the federal gasoline tax until September should help alleviate some of that,” he says. “The Bank can leave the overnight rate for now and revisit the situation in June.”

Penelope Graham, mortgage expert and director of content at Ratehub.ca, outlines a scenario in which the BoC could, at a later date, hike rates. “They’ll have to take action if it becomes evident that supply chain snarls due to rising fuel prices are infiltrating the basket of goods more broadly,” she says. “Until that occurs — and pending any other surprise geopolitical or trade shocks — the central bank will remain on the sidelines in terms of its benchmark overnight lending rate.”