The long shadow of the COVID-19 pandemic will be felt until around 2023, economists say
A significant fraction of economists believe that the Bank of Canada’s current record-low rate will remain on hold for a year or longer, according to a new poll by Finder.
The study found that 81% of economists are expecting the central bank to keep the overnight rate at 0.25% in its July 15 meeting, with the hold lasting for more than a year. Around 63% of respondents also said that the rate won’t move until sometime in 2022 or 2023.
Post-crisis conditions will be a major driver of the bank’s strategy in the coming quarters, the survey consensus indicated.
“The economy is opening up based on positive news regarding coronavirus infections, recoveries, etc., but the economy has done very little to prepare itself for if/when a second wave returns in the fall,” said Moshe Lander, poll respondent and professor at Concordia University. “Those safeguards should be put in place now while there is time rather than in haste and haphazardly when it strikes, to limit the economic damage.”
Most economists are also expecting relative stability in terms of home prices, with an annual decline of just around 2% in late 2020.
“This rosy forecast was a reversal from the Bank of Canada June report which found our experts more pessimistic about housing valuation, predicting an average price decline of around 8% with double-digit decreases for Vancouver and Toronto,” said the Finder report. “This time, around Vancouver and Calgary are forecasted to decrease the most at 4% each, followed by Toronto and Edmonton at 3% each.”
This trend will be apparent in most of the country, likely signalling a gradual return to more manageable conditions.
“Meanwhile cities like Montreal, Quebec City, Hamilton and Ottawa are forecasted to experience more modest declines, while Halifax and Winnipeg are predicted to remain totally flat on average,” Finder said.
