The end is near as far as interest rate hikes go.That’s the main takeaway from the Bank of Canada’s rate announcement on Wednesday, which signalled a softer tone going forward.Although the bank held rates steady at 5% — a 22-year high — for a fourth consecutive meeting, analysts had been looking for language that would provide an indicator of its future plans in coming months. What they got were decidedly more ‘dovish’ communications that would suggest interest cuts are in the offing by the first half of this year. “Governor Tiff Macklem all but confirmed borrowing costs have peaked,” said Kevin Carmichael, with The Logic newsletter.That’s because the bank’s data show the economy has stalled and Is expected to remain slow in the near term, which could still lead to a recession. As part of the rate announcement, the bean-counters cut their economic growth projection a tenth of a point to 0.8% for the year.“There was a clear consensus to maintain our policy rate at 5%,” Macklem said in prepared remarks from Ottawa. “If the economy evolves broadly in line with the projection we published today, I expect future discussions will be about how long we maintain the policy rate at 5%.”.It was in marked contrast to previous announcements that indicated Macklem was prepared to keep tightening the screws if inflation didn’t start falling towards his 2% target.That number came in hotter than expected in December, at 3.4%, but is expected to decline to about 2.5% in the second half of the year. Most economists expect the bank to start cutting in June.“Over the projection horizon, ongoing excess supply in the economy continues to weigh on prices, and corporate pricing behaviour and inflation expectations gradually return to normal,” the bank said in an accompanying monetary policy report..“My expectation is that rate cuts will come later and will be of a lower magnitude than most are anticipating. Anyone with a variable-rate mortgage or HELOC will be disappointed that there were no hints as to when they can expect the first rate cut.”CanWise mortgage CEO James Laird.The downside is higher interest rates are expected to keep house prices and rental rates — so-called ‘shelter inflation’ — higher for some time to come.According to Royal LePage president and CEO Phil Soper, major housing markets across the country have already reported an uptick in buying and selling activity even before the latest rate announcement, including Calgary.“I believe the narrative suggesting that the housing market will rebound only when the Bank of Canada lowers rates misses the mark,” he said in an email to Western Standard.“The recovery will begin when consumers have confidence the home they buy today will not be worth less tomorrow. We see that tipping point occurring in the first quarter.”But James Laird, co-CEO of ratehub.ca and president of CanWise mortgage lender, said borrowers shouldn’t hold their collective breaths waiting for substantial rate cuts. “My expectation is that rate cuts will come later and will be of a lower magnitude than most are anticipating,” he said in a statement. “Anyone with a variable-rate mortgage or HELOC will be disappointed that there were no hints as to when they can expect the first rate cut.”
The end is near as far as interest rate hikes go.That’s the main takeaway from the Bank of Canada’s rate announcement on Wednesday, which signalled a softer tone going forward.Although the bank held rates steady at 5% — a 22-year high — for a fourth consecutive meeting, analysts had been looking for language that would provide an indicator of its future plans in coming months. What they got were decidedly more ‘dovish’ communications that would suggest interest cuts are in the offing by the first half of this year. “Governor Tiff Macklem all but confirmed borrowing costs have peaked,” said Kevin Carmichael, with The Logic newsletter.That’s because the bank’s data show the economy has stalled and Is expected to remain slow in the near term, which could still lead to a recession. As part of the rate announcement, the bean-counters cut their economic growth projection a tenth of a point to 0.8% for the year.“There was a clear consensus to maintain our policy rate at 5%,” Macklem said in prepared remarks from Ottawa. “If the economy evolves broadly in line with the projection we published today, I expect future discussions will be about how long we maintain the policy rate at 5%.”.It was in marked contrast to previous announcements that indicated Macklem was prepared to keep tightening the screws if inflation didn’t start falling towards his 2% target.That number came in hotter than expected in December, at 3.4%, but is expected to decline to about 2.5% in the second half of the year. Most economists expect the bank to start cutting in June.“Over the projection horizon, ongoing excess supply in the economy continues to weigh on prices, and corporate pricing behaviour and inflation expectations gradually return to normal,” the bank said in an accompanying monetary policy report..“My expectation is that rate cuts will come later and will be of a lower magnitude than most are anticipating. Anyone with a variable-rate mortgage or HELOC will be disappointed that there were no hints as to when they can expect the first rate cut.”CanWise mortgage CEO James Laird.The downside is higher interest rates are expected to keep house prices and rental rates — so-called ‘shelter inflation’ — higher for some time to come.According to Royal LePage president and CEO Phil Soper, major housing markets across the country have already reported an uptick in buying and selling activity even before the latest rate announcement, including Calgary.“I believe the narrative suggesting that the housing market will rebound only when the Bank of Canada lowers rates misses the mark,” he said in an email to Western Standard.“The recovery will begin when consumers have confidence the home they buy today will not be worth less tomorrow. We see that tipping point occurring in the first quarter.”But James Laird, co-CEO of ratehub.ca and president of CanWise mortgage lender, said borrowers shouldn’t hold their collective breaths waiting for substantial rate cuts. “My expectation is that rate cuts will come later and will be of a lower magnitude than most are anticipating,” he said in a statement. “Anyone with a variable-rate mortgage or HELOC will be disappointed that there were no hints as to when they can expect the first rate cut.”
