The central bank could reduce the key rate by 50 basis points next week to establish it at 3.75%, “a threshold that has not been reached since December 2022,” recalls Philippe Simard, mortgage director at Quebec at Ratehub.ca.
Statistics Canada announced on Tuesday that annual inflation had slowed to 1.6% in September. “With inflation well below the Bank’s forecasts and below its target of 1.6%, it is obvious that the Bank will have to act more quickly to adjust rates in order to support economic growth,” adds Mr. Simard.
The central bank has cut its key rate three times this year to 4.25%, after raising it to counter the effects of inflation.
Bank of Canada Governor Tiff Macklem has already signaled that it is reasonable to expect further interest rate cuts, given the progress made on inflation, but he has warned that the pace and timing of reductions would depend on the central bank’s assessment of economic data.
The latest announcement on the consumer price index “reinforced market expectations [de l’habitation] regarding a greater reduction in interest rates,” writes Mr. Simard. Thus, “five-year Canadian bond yields have fallen to around 2.9%, which could put downward pressure on fixed mortgage rates, currently at a low of 3.99% for a five-year term. », adds Philippe Simard.
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Potential interest rate reductions could lead future buyers to wait to see how far borrowing costs continue to fall.
Mr. Simard indicates that Canadian buyers are responding to the various reductions in the key rate made this year. “The latest national data shows an increase in sales, both on a monthly and annual basis,” emphasizes the expert.
With information from The Canadian Press
