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Back to Rate Hikes After a Pause

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The Bank of Canada resumed rate hikes this morning, although at the smallest possible level of +0.25%. After clearly communicating a ”wait-and-see” approach earlier in the year, it seem they have enough evidence to continue raising. 
As much as we may dislike it, there are three clear arguments for hiking rates:

  • The housing market is heating up again – the average house price in Toronto is now rising $35,000 a month (!). Affordability and housing debt is one of the main concerns for the Bank and policymakers.
  • The US raised rates in May to 5.25%, and there’s only so much we can deviate without harming the purchasing power of the CAD.
  • Inflation is not under control. The Bank press release notes that the price of goods is rising, even while the cost of gas is down. You can see in the chart below that demand for services and ”semi-durable” goods (clothes, jewelery, shoes) are still way up; it’s only ”non-durable” like energy that are down, largely due to global factors.
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Summary
The Bank of Canada raised rates +0.25% to a new rate of 4.75%. Concern over continued high prices for essentials and services impacted this decision. 
 

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Pour plus d’informations, veuillez contacter:

Adam Jacobs

Head of Research | Canada

Toronto Downtown

Colliers Canada's head of research, leading a cross-country team of 20 mapping, analytics and research professionals. Formerly head of Canada research at Cushman Wakefield and Director of Analytics at Oxford Properties. Featured in mainstream publications such as the Toronto Star, industry publications and podcasts. Specializing in the big picture and the fundamentals driving real estate - demographics, the macro environment and the global economy. 

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