ECONOMY Canadian Housing Markets Could See

• By Brian Shaw
• Posted Monday, Jan 22, 2024 10:13 am

ECONOMY Canadian Housing Markets Could See

TD Economics is calling 2024 '“the year of the cut” in Canada, with markets pricing the first interest rate cut as soon as April. 

In a note from Friday, TD’s Marc Ercolao writes that the Bank of Canada (BoC) is expected to bring the policy rate — which currently sits at a 22-year high of 5% — down to 3.5% by the end of 2024.

That figure is “slightly lower than market expectations of 3.75%,” but also “notably tighter than pre-pandemic levels,” Ercolao adds. 

Although Ercolao says there is plenty of proof that the BoC’s policy of quantitative tightening has been working — he notes that “consumers are reeling in their spending, and growth is evolving in a manner consistent with inflation inching closer to the BoC's 2% target” — he cautions that we’re not out of the woods quite yet. 

“Inflation remains elevated and wage growth is still running hot,” Ercolao writes. “Thus, we sit at a critical crossroads between prematurely cutting rates and potentially reigniting inflation, or keeping conditions too tight, causing more economic pain than necessary.”

Speaking specifically to inflation, Ercolao warns that the next reading, slated for January 17, could see the metric “accelerate on the back of base effects that saw weak inflation a year ago.” Even so, he notes that inflation is “trending in the right direction” and is expected to...[READ MORE]