Canadian Market-Watchers Nearly Unanimous With Rate-Cut 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

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.

While the Canadian economy is demonstrating resilience in the face of a fraught trade relationship with the U.S, many market-watchers still expect Canada’s central bank to further reduce interest rates on Wednesday.

In fact, 10-out-11 respondents to Wahi’s latest Rate Outlook Panel say the central bank will follow up September’s 25-basis-point rate cut with another one this week.

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 and analysts. 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.

“There are very clear signals that the economy is slowing down,” says CIBC Deputy Chief Economist Benjamin Tal. He notes a weaker labour market as well as slackening business investment and uncertainty from the Trump administration as soft points. Tal also says inflation may be weaker than it appears, citing the rental-housing market as an example.

For example, many tenants are receiving a month or two of free rent upon leasing, which translates to cheaper rent — and downward pressure on inflation — but this isn’t reflected in the data, which only take into account monthly rates. “Rent inflation is not really telling you what’s happening in the real world,” he says.

The Bank of Canada uses rate cuts to boost consumer and business spending during cooler economic periods. By lowering interest rates, borrowing becomes more attractive. Though the BoC generally targets an annual rate of inflation between 1 and 3%, policymakers may try to get ahead of potential downturns before they’re reflected in the data. 

Canada’s trade conflict with the U.S. was brought up by several other respondents in addition to Tal. “The latest tariff threats from the U.S. administration adds to downside risk for Canada’s economy,” adds Bryan Yu, chief economist for Central 1 Credit Union.

Shawn Woof, sales representative and senior vice president at Sotheby’s International Realty Canada, echoes Yu’s sentiment concerning American policy: “Economic uncertainty with the ongoing trade war likely makes the modest cut make sense.”

Penelope Graham, mortgage expert and director of content at Ratehub.ca, agrees there’s enough evidence in the numbers for the BoC to justify another cut. “In particular, the results of the BoC’s latest Business Outlook Survey, which showed sluggish hiring and investing sentiment among businesses, will compel the central bank to ease rates,” she says.

A follow-up to September’s cut is needed since the economic picture hasn’t brightened this fall, suggests RBC Assistant Chief Economist Robert Hogue. “The unemployment rate at 7.1% in September was still elevated despite a rebound in employment counts,” notes Hogue. “And, lower inflation expectations in the latest Business Outlook Survey are consistent with the BoC’s assessment of fading upside inflation risks,” he adds.

Alex Leduc, founder and CEO of Perch Mortgages was the lone hold out in Wahi’s Rate Outlook Panel this month. “The negative economic outlook for the Canadian economy and the rising unemployment likely weighed heavily on the Bank of Canada, but the uptick in inflation to 2.8% in September likely was enough to stay their hand to prevent inflation from further accelerating,” he explains.

Although Moshe Lander, a senior economics lecturer at Concordia University, anticipates a cut he, like Leduc, isn’t convinced it’s necessary. “I don’t know that I would do it,” he says. Lander notes that inflation is still around the central bank’s target, even if there are other cracks in the backdrop, such as employment. “It really is a coin toss,” he adds.