What is the outlook on inflation for the Bank of Canada?

Monetary Policy Report – July 2022 The Bank is projecting inflation to decline to about 3% by the end of 2023, and to return to the 2% target by the end of 2024 .

What is the Bank of Canada forecast for 2024?

Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026.

What is the Bank of Canada rate projection?

Bank of Canada Monetary Policy Forecast 2025 Core inflation, the measurement the Bank of Canada relies on when making policy rate decisions, is expected to ease, returning to 2% in the second half of 2025. With inflation at the 2% target, the BoC will likely reduce rates within the neutral rate range of 2.25% to 3.25% .

Why does Bank of Canada have a target for inflation?

The objective of Canadian monetary policy is to pre- serve confidence in the value (purchasing power) of money by keeping inflation low, stable and predictable . The Bank of Canada sets its policy interest rate so as to keep inflation at 2 per cent, on average, over the medium term.

Which country has the highest inflation rate?

Top 10 Countries with the Highest Inflation Rates (Trading Economics Jan 2022) With an inflation rate that has soared above one million percent in recent years, Venezuela has the highest inflation rate in the world.

What will Bank of Canada rate be in 2025?

So, in other words, Canadians could see the current 4.5% overnight lending rate drop to 2.75% by the end of 2025. “Rates are forecasted to come down,” Hencic said, “and they are expected to continue to come down as the economy gradually slows down and the labour market cools.”

What are the dates for the Bank of Canada interest rate announcement?

The next interest rate announcement is set for September 4, 2024 .

Where can I get 7% interest on my money?

7% Interest Savings Accounts: What You Need To Know. Why Trust Us? As of July 2024, no banks are offering 7% interest rates on savings accounts . Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.

Will Bank of Canada lower rates again?

The Bank of Canada cut its benchmark interest rate last Wednesday by 25 basis points for the second time this year, bringing it down to 4.5 percent, its lowest since April 2023. The move was widely expected by economists, who forecast further cuts through 2024 and possibly into next year .

What is the outlook for Canadian banks?

Canadian domestic systemically important banks' (D-SIBs') profit growth is likely to remain under pressure in 2024 from rising provisions for loan losses and still-high expenses, although growth is moderating.

What is Canada's Inflation Rate right now?

Basic Info. Canada Inflation Rate is at 2.67% , compared to 2.87% last month and 2.81% last year. This is lower than the long term average of 3.15%.

What is the economic outlook for Canada in 2024?

Real gross domestic product (GDP) growth is projected to slow from 1.1 per cent in 2023 to 0.7 per cent in 2024, before rebounding to 1.9 per cent in 2025 (previously 0.5 per cent and 2.2 per cent, respectively).

MARKET UPDATE | Bank of Canada and Inflation - Amir + Aleks Realty Team (2024)

April 21st, 2022 | Market Watch

April 13th

Canada’s inflation rate hit 6.7% in the month of March
Highest increase in our inflation rate since Feb 1991
Coincidentally, last time our inflation rate was this high, ourprime ratewas sitting at 11.25% (vs. the 3.2% rate we’re at now)
Not a big surprise, as the US just announced they’re inflation rate is sitting at 8.5%
Canada had forecasted inflation would rise and hover around 6%, for at least the first half of 2022
Again, doesn’t take a genius to realise this, given we’ve seen the cost of goods … never mind, the cost of everything, go up significantly over the last 12 months (gas, food, transportation, services etc.)
During the April 13 Monetary Policy Report Press Conference, the BoC Governor, Tiff Macklem, said this:
- “We now expect inflation to average almost 6% in the first half of 2022 and remain well above our 1% to 3% control range throughout this year. We then expect it to ease to about 2½% in the second half of 2023 before returning to the 2% target in 2024.”
Mr. Macklem then followed, stating:
- “With inflation broadening and remaining higher for longer, the risk is that Canadians start to think that high inflation will become entrenched.”
And the latter IS A PROBLEM, as it contributes to a self-fulfilling prophecy
If Canadians “start to think that high inflation will become entrenched”, they’ll likely want to get into the market sooner, as they’ll believe the cost of goods, services etc. and hence land, homes and all things real estate, will only continue to rise
You can see the problem here, can’t you?
More (reasonable or unreasonable) demand, means prices will continue to rise, and so will inflation
And hence, the Governor introduced his third point – increasing interest rates
Raising the policy rate is the main tool the BoC has to moderate demand, and prevent a persistent buildup in domestic price pressures
However, it’s important to distinguish the difference and clearly establish the BoC’s target – that being to get inflation under control, not an interest rate target
At least that’s our interpretation of Tiff Macklem’s comments, namely:
- “…we have an inflation target, not an interest rate target. This means government councel is not on auto-pilot to a pre-established destination for the policy interest rate. How high interest rates will go will depend on how the economy responds, and how the outlook for inflation evolves.”
So, while the BoC is being more aggressive than ever in its desire to raise rates, they’ll have no choice but to continue raising them until inflation is under control – and if that doesn’t happen in 2023 or 2024 – guess what? Up we go again … until demand is curbed, prices stabilize, and inflation numbers start to normalize
At least that’s the idea, right?
The message by the BoC is clear, money is going to become more expensive – sochill out, and stop spending like maniacs!
Here’s the issue with that – it was only at the beginning of the pandemic that the BoC was conveying literally the complete opposite message – money is cheap, go spend all you want, in fact – stay home, we’ll send you lots and lots of money, buy online! (amazon stock anybody?)

So, what’s the bottom line?

Ultimately, the BoC can do little but to increase rates in hopes of making money more expensive, curbing spending and trying to get inflation under control (down)
In our opinion, the BoC Governor, Tiff Macklem, hopes that these announcements will effectively scare consumers
And through their (Buyers/Investors/Consumers) perceptions, the market will see a shift
So far, it’s doing so in that …
We’re seeing showing numbers down
Fewer showings = fewer potential offers
Fewer offers = less likelihood for prices to go (way) above ask
Hence we’re seeing more homes listed with “offers anytime” vs. on “offer deadlines” or “offer dates”
Seller’s are also having to re-list, and price change, often within 1-3 weeks of coming to market
All this change in the last 2 months essentially
So, so far, the ‘plan’ seems to be working
But, there is an issue with the Mr. Macklem’s plan … namely, so long as inflation is above the interest rates, fundamentally, the market is still encouraging YOU & I to spend
Why?Because money TODAY at 3% is cheaper vs. money tomorrow, if inflation is at near 7%
Hence, Tiff and co.will undoubtedly be keeping a super close eye on the market as we head to the next Bank of Canada announcement, set for June 1st
Where we might expect yet another 50-basis point increase, should things not ease in a meaningful way

IMPORTANT LINKS:

For Press Conference Monetary Report – CLICK HERE
If you’d like to know more about Amir’s take on the Bank of Canada and Interest Rates, check out our blog post HERE