With inflation rising to 2% in Canada in October, a further significant reduction in interest rates by the Bank of Canada on December 11 is becoming less likely.
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“The cost of housing contributes a lot to inflation and that will continue next year,” observes Desjardins economist Benoit Durocher.
The price of housing increased again faster than overall inflation in October, with an increase of 7.3% for rents and 14.7% for mortgage interest.
In Canada, inflation as a whole rose from 1.6% in September to 2% in October, Statistics Canada said Tuesday. In Quebec, the overall increase is 1.6%, compared to 1.3% in September.
Desjardins indicated in a study published last week that rent inflation has become a major concern for households, because the number of tenants is increasing sharply.
High prices prevent potential first-time buyers from entering the market, leading “many people to turn to rental housing.”
These tenants will have no respite, underlines Benoit Durocher, because “the price of rents will continue to rise in 2025”.
In Montreal, during the most recent moving season, last June, two-bedroom apartments for rent were listed for an average of $2,301, according to data from Rentals.ca. The increase is $362 per month compared to July 2022.
Across the entire rental universe of the Montreal census metropolitan area (CMA), the average monthly rent for a two-bedroom apartment increased from $1,096 in 2023 to $1,190 in 2024, calculates the Canada Mortgage Corporation and housing (CMHC).
The organization predicts that the price will increase to $1,390 on average in 2026, so that the increase will be $3,528 per year from 2023 to 2026 for a 4 and a half, an increase of 27%.
Average monthly rent
For a two-bedroom accommodation in the Montreal CMA
- 1096$ – 2023
- 1190$ – 2024
- 1290$ – 2025
- 1390$ – 2026
Source: Canada Mortgage and Housing Corporation
And the key rate?
If the price of rents and mortgages rises significantly, the overall picture of inflation, at 2%, is rather positive, analyzes the Desjardins economist.
“This is what the Bank of Canada is looking at,” summarizes Benoit Durocher, who expects a drop of 25 or 50 basis points on December 11.
This is also the forecast of his colleagues, who all expected, before Tuesday, that the Bank of Canada would reduce its key rate from 3.75% to 3.25% during its next announcement.
This is still the Royal Bank’s forecast, economist Abbey Xu said in a note published Tuesday. Same thing for the firm Capital Economics and the National Bank.
Prices at the grocery store too
Like rents and mortgages, grocery prices also increased faster than the rest, in October, with an increase of 2.7% from 2023 to 2024.
“This is not normal and it is worrying. Food has contributed to pushing general inflation upwards since June,” underlines Sylvain Charlebois, food specialist at Dalhousie University.
The 7.3% increase in the price of fresh vegetables in October is due to the reduction in imports, which led to an increase in prices in this category.
“Our agri-food sector costs us more than imported products. This is not a good sign,” underlines the expert.
The three categories influenced by domestic production – meats, dairy products and fruits and vegetables – therefore contributed to increasing inflation in October.
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