Residential Market Commentary - BoC Holds Again

Another interest rate setting and another hold by the Bank of Canada.  For the sixth time in a row the central bank has decided to leave its trend-setting Policy Rate at 2.25%. 

“Uncertainty” and the price of oil are the two key factors the Bank is watching but, in the main, it says Canada’s economy is looking stronger. 

“Canada’s economy is showing signs of improvement.  Growth is picking up and inflation is projected to ease gradually from its recent spike.  There are still important risks and uncertainties related to the war in the Middle East and US trade policy,” the Bank said in a release. 

Market watchers say those “risks and uncertainties” mean the path of economic growth will likely be bumpy. 

The Bank expects inflation will ease through the remainder of this year, dropping back to 2.5%, eventually falling to 2.0% in the early part of 2027.  So far, the erratic and elevated price of oil does not appear to be fueling broader inflation.  While the Bank dropped references to interest rate hikes to combat that kind of spillover, Governor Tiff Macklem says hikes will be made if higher energy prices begin to entrench themselves. 

Slow growth and the risk of rising inflation have been posing a dilemma for the bank.  Raising interest rates would help combat inflation, but lowering them would boost growth.  Most analysts now expect the BoC will stay on the sidelines for the rest of the year.   

The Bank’s next rate announcement is set for September 2.

- First National