The Bank of Canada held its overnight rate at 4.5% on Wednesday, as was expected by most economists in the country. It’s the second hold by the bank this year after a series of increases that started last year.. real estate, housing .In a statement announcing its decision, the bank said, “In Canada, demand is still exceeding supply, and the labour market remains tight. Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth.”.“While the Bank’s Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth is still elevated relative to productivity growth. Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption. Housing market activity remains subdued.”.A factor in the bank’s decision was consumer price index inflation (CPI) dropping to 5.2% in February, and the bank’s preferred measures of core inflation were just under 5%..“The bank expects CPI inflation to fall quickly to around 3% in the middle of this year and then decline more gradually to the 2% target by the end of 2024,” it said in the statement. “Recent data is reinforcing Governing Council’s confidence that inflation will continue to decline in the next few months. However, getting inflation the rest of the way back to 2% could prove to be more difficult because inflation expectations are coming down slowly, service price inflation and wage growth remain elevated, and corporate pricing behaviour has yet to normalize.”.“As more households renew their mortgages at higher rates and restrictive monetary policy works its way through the economy more broadly, consumption is expected to moderate this year. Overall, GDP growth is projected to be weak through the remainder of this year before strengthening gradually next year. This implies the economy will move into excess supply in the second half of this year. The bank now projects Canada’s economy to grow by 1.4% this year and 1.3% in 2024 before picking up to 2.5% in 2025.”.The bank made it clear it's prepared to hike the rate if and when necessary..“Governing Council continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2% target. The Bank remains resolute in its commitment to restoring price stability for Canadians.”.Francis Gosselin, consulting economist for nesto.ca believes there's a “decent chance” the bank could lower its rate before the end of the year..“We’ve seen a continuous decrease in the inflation rates in Canada. Some goods and services, like food, are still increasing. But a lot of other goods and services are stable,” Gosselin told Canadian Mortgage Professional..“It’s also interesting a lot of the inflation we're carrying right now is due to the increase in home mortgage payments that was the consequence of the policy rate’s increase.”.The bank’s decision was what Phil Soper, president of Royal LePage, expected, and he says it may get more homebuyers back into the market..Royal LePage researched Canadian’s opinions about home buying after the bank’s March decision to hold its rate..“We went to the market and asked about their thoughts,” says Soper. “Of those who wanted to be in the market, which was 24% of Canadian adult households, there was about one-quarter of those who were back in the market and another 24% who said they wanted to wait for another Bank of Canada rate decision, wanting to see if in fact things were on stable footing or if that was just the one-time event to hold steady.”.“So now they have a second data point and I think it could be a trigger point event to get them back into the market.”.But just like the Canadian spring there will be some clouds occasionally blocking out the sun..“I believe the impact on the economy overall of tightened credit and some of the challenges that are circulating below the surface in financial markets and banking around the world will have a bigger impact on the economy than it appears right now,” says Soper..“I think we'll see employment start to soften ever so slightly after the seemingly endless job creation machine that the economy has become.”
