FURTHER REDUCTION IN INTEREST RATES EXPECTED IN CANADA. CONTACT ME FOR A MORTGAGE IN CANADA
July 23, 2024 | Posted by: Anvaar Rasool
A further 25 basis points rate cut in its overnight lending rate by Bank of Canada (BOC) is expected on July 24th. BOC rate has been at 4.75 % since June last month, when the Bank made its first cut since March 2020. Easing of inflationary pressures, weakness in retail sales data and easing of labor markets, though not pointing to a recession yet but definitely weak GDP growth. All these developments increase the probability of a rate cut by BOC. Canada's inflation rate eased more than expected in June to 2.7 % according to Statistics Canada's latest inflation report last week, raising bets of a July rate cut. In addition to the latest inflation report, rising unemployment and subdued expectations for growth by Canadian businesses all support the prospect of another rate cut. While inflation remains higher than BOC's 2% target, delaying rate cuts any longer will have negative repercussions. The interest rates at the levels they are currently, are very prohibitive as can be felt in consumer spending trends and the housing market. The latest Statistic Canada report on retail sales showed Canadians reigned in their spending in May as retail sales dropped 0.8 % to $66.8 billion. What the Bank of Canada is trying to do is just reduce the amount of restraint it is placing on the economy. It's not trying to stimulate the economy, it's just trying to reduce the amount of headwinds it's providing. The most recent data on the Canadian job market shows the economy stalling in June, while the unemployment rate rose to 6.4 per cent, from 6.2 per cent in May. The June result was the highest reading for the unemployment rate since January 2022, another indication that raises the odds of the Bank of Canada lowering rates this week.
Canada's inflation rate eased more than expected in June to 2.7 % according to Statistics Canada's latest inflation report last week, raising bets of a July rate cut. In addition to the latest inflation report, rising unemployment and subdued expectations for growth by Canadian businesses all support the prospect of another rate cut. While inflation remains higher than BOC's 2% target, delaying rate cuts any longer will have negative repercussions. The interest rates at the levels they are currently, are very prohibitive as can be felt in consumer spending trends and the housing market. The latest Statistic Canada report on retail sales showed Canadians reigned in their spending in May as retail sales dropped 0.8 % to $66.8 billion. What the Bank of Canada is trying to do is just reduce the amount of restraint it is placing on the economy. It's not trying to stimulate the economy, it's just trying to reduce the amount of headwinds it's providing.
The most recent data on the Canadian job market shows the economy stalling in June, while the unemployment rate rose to 6.4 per cent, from 6.2 per cent in May. The June result was the highest reading for the unemployment rate since January 2022, another indication that raises the odds of the Bank of Canada lowering rates this week.