Rates also unlikely to drop in the near future, observers warn
A return of interest rates to pre-pandemic levels will almost certainly not happen at this point, with the Bank of Canada’s benchmark policy rate now at a 22-year high of 5%, according to market observers.
If anything, Canadians tend to be too optimistic about the pace of rate cuts, TD chief economist Beata Caranci warned.
Caranci stressed that right now, there is no guarantee that rates will actually fall in the near future.
“If you look at our forecast, if you look at the consensus on the street ... most people have some cuts coming in by the second half of next year,” Caranci told BNN Bloomberg. “But that’s presumed that the economy is weaker than it is today.”
“One of the points I’ve been stressing with our clients is, the speed at which rates went up will not be the speed at which they go down.”
The Bank of Canada holds its rate at 5%, signaling confidence in inflation control. But what's the cost for the economy? Experts weigh in.
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 27, 2023
Read more: https://t.co/dZem1YznPB#MortgageIndustry #RateHike #InterestRates #Inflation
What is the likely BoC rate range moving forward?
David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, said that the central bank might keep its benchmark rate between 2% and 3% to maintain a cooling pressure on inflation.
However, Macdonald said that this development is “a ways off. That’s not next year.”
In the interim, Canadians will have to contend with a “difficult period of adjustment” amid continuously rising costs.
“We’ve still got a long way to go at these much higher interest rates and much higher inflation,” he said.
