17 Canadian Interest Rate Predictions from Seasoned Market-Watchers

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

By Josh Sherman | 2 minute read

Mar 10

The number of homes on the market continues to climb in major Canadian cities giving some buyers a shot at a discount.

The Bank of Canada’s overnight rate, which influences borrowing costs, currently sits at 3%.

A full-blown trade war, complete with industry-threatening tariffs on Canada. Verbal spats between the U.S. president and Canadian prime minister. Threats to make the Great White North America’s 51st state. The Bank of Canada has a lot to contend with ahead of its next interest rate announcement slated for March 12. So does anyone trying to make a prediction about what the central bank does next. At its first announcement of the year, on Jan. 29, the BoC met the prevailing market expectations by slicing its key policy rate, also known as the overnight rate, by 25 basis points to 3%. This time around, market-watchers are largely — but by no means unanimously — predicting the Bank of Canada will once again trim its influential overnight rate. So suggests an informal Wahi survey of more than a dozen real estate industry professionals, from economists and analysts to homebuilders, Realtors, and mortgage brokers. Respondents were asked whether they anticipate a rate cut — and, if so, by how much — as well as the reasoning behind their decision. Overall, just under two-thirds (11 out of 17) of respondents predict the central bank will reduce the key policy rate once again on Wednesday, with the remaining six anticipating a hold. “Despite stronger economic data recently, tariff[s] will drive the cut,” writes Daren King, an economist at National Bank, in his Wahi survey response. Wayne Kainu, head of mortgages at Neo Financial, echoes King’s remarks: “I believe the BoC will cut the overnight rate next week in response to the economic risks imposed by Trump’s tariffs on Canadian exports.” Among those who forecast a cut, all but one pencilled in 25 basis points. Peter Norman, chief economist at the Altus Group, a real estate consultancy, is the outlier. He estimates the BoC will most likely chop 50 basis points off the overnight rate, though there’s a 25% chance they opt for 75 basis points, he adds. “Given the evolving tariff situation — acknowledged to have significant downside economic risks for Canada — and the uncertainty surrounding their timing and scope, the outlook remains challenging,” Norman notes. Daniel Foch, chief real estate officer at Valery.ca, a real estate brokerage, was nearly on the same page as Norman. But he changed his mind after U.S. President Donald Trump agreed on Thursday to roll back a host of tariffs on goods covered by the Canada-U.S.-Mexico Agreement, at least until April 2. “The economy is already in really bad shape and tariffs are only going to worsen that,” says Foch, who foresees a 25-basis-point cut happening on Wednesday. All respondents regardless of the prediction considered the recent developments stateside — namely, the U.S.’s ongoing threats and actions regarding tariffs on Canadian imports. “Now that tariff threats have become reality, there will be consequences for the Canadian economy, and the central bank will be keen to add padding where it can to help consumers withstand the impact,” Penelope Graham, a mortgage expert and director of content at Ratehub.ca, replies. However, she notes, the BoC won’t want to become too aggressive yet. “This is partly due to uncertainty over how long tariffs will last; the longer they stick around, the more stimulus the BoC will need to provide to counter the effects,” Graham continues. While Patrick Francey, CEO of the Real Estate Investment Network Canada, says a 25-basis-point reduction is “a given,” there’s a chance monetary policymakers opt for 50, he adds. “A month ago, I would have said they would hold. Based on what is happening today they almost have no choice but to cut,” says Francey.

The Case Against Cuts (For Now)

The fact that President Trump’s stance on tariffs has changed several times in recent months (and more than once in recent days) is just one of the reasons some observers doubt the BoC will want to do anything concrete on Wednesday. “My reasoning is that the tariffs and the uncertainty about them will be putting downward pressure on the Canadian dollar and the Bank will not want to add to this by reducing interest rates,” adds Frank Clayton, senior research fellow for Toronto Metropolitan University’s Centre for Urban Research and Land Development.

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Another reason to hold: the central bank is facing “two competing tensions,” according to Moshe Lander, a senior economics lecturer at Concordia University. By adding to the cost of goods, tariffs cause inflation, which is usually met with higher interest rates. However, the trade war is also expected to hurt the Canadian economy, which on its own would suggest the need for lower rates. “Best for the Bank to stay on the sidelines until it is clear which tension will dominate,” Lander explains.

Although RBC Assistant Chief Economist Robert Hogue suspects the BoC will hit pause this week, he wouldn’t be surprised if it went the other way. “We think it will hold but it’s a close call,” RBC Economics’s top economist tells Wahi in an email.

That’s because despite tariff risks clouding the outlook, Canada’s economy has been looking strong enough for the BoC to otherwise end its rate-cutting cycle, which began last June, when the overnight rate stood at 5%.

To Alex Leduc, CEO and founder of Perch Mortgages, current economic indicators don’t warrant action from the BoC. “The core factors that influence the BOC’s decision are all pointing towards hold,” he says. Leduc cites stable inflation, as well as steady unemployment and GDP growth standing at 1.8%.

“If the BOC does cut, it would be because they expect tariffs to cause serious damage and they would make that their priority and the above factors would be secondary,” says Leduc.

Bryan Yu, chief economist at Central 1, a Canadian credit union, agrees that the economy has looked fairly solid of late, which buys the bank some time before it takes action. “The data will likely show more signs of weakening going forward which should trigger rate cuts, but at this point, [the BoC] can be patient especially if the governments are leaning against the weakness with policy,” he says.