Passer au contenu principal Passer au pied de page

No Rate Hike from Bank of Canada, But Still Clouds on the Horizon

Research Weekly Insights Rate Hikes Paused As Expected Hero

”In time, the savage bull doth bear the yoke” – Shakespeare


Let’s get it out of the way: the Bank of Canada held rates at 4.5%, as expected by everyone from professional economists to media commentators. So the worst is over? Perhaps. We’ve seen inflation slow down, house prices return to a more affordable range, and the dollar remain at the level of 3-4 years ago. But I don’t rule out additional hikes later this year, as much as we’d all like the pain to end.

For years the Canadian household was invincible, borrowing and spending more and more – and real estate was a big part of that. As you can see in the chart, Canada is the most indebted G7 country at the household level. We consider ourselves more prudent than the US, but the data says otherwise, with debt levels 83% higher here.

The Bank’s job now is to restore order: encourage saving, control inflation, calm the housing market and rein in the ”savage bull” of borrowing, spending and inflation. I give the Bank credit for hiking more aggressively than its peers; there are still central banks cutting rates. Unfortunately, the Bank of Canada has also lost credibility during the pandemic. Let’s not forget that statement in 2020 that rates wouldn’t rise for years. Instead we had seven hikes in 2022, and the current situation where a significant portion of homeowners aren’t covering the interest on the mortgage.

And yesterday, the US Fed chairman said ”the ultimate level of interest rates is likely to be higher than previously anticipated.” Oh boy, that’s not what anyone was hoping to hear. Now devil’s advocate here; this is the perception game of convincing people you’re serious. There is still a sentiment that rate cuts are right around the corner, and that’s ”priced in” to the market. The central banks need to convince investors and borrowers they’re serious, and talking tough is part of that. But it’s still an indication that more hikes are coming eventually, to convince borrowers of the new regime.

Rate Hikes Paused As Expected Infographic

Summary

The Bank of Canada held interest rates at 4.5%, as expected by most economist. The US central bank has signalled the possibility of 0.5%+ raises later this month, which may impact the Canadian currency and interest rate policy.

READ PREVIOUS INSIGHTS REPORT


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. 

Voir l'expert