12 Aug

Residential Market Commentary – Waiting for more data

General

Posted by: Frank Fik

The Bank of Canada’s next interest rate announcement is set for September 17.  Between now and then there will be plenty of economic data to digest.

The latest significant report was Statistics Canada’s July employment reading, which surprised most analysts with a drop of nearly 41,000 jobs.  Most of those positions were full-time.  The unemployment rate was unchanged at 6.9%.

Expectations had been for an increase of 13,500 jobs.

Well known Canadian economist Douglas Porter referred to the report as “unambiguously weak”, especially in light of the June employment report that showed 83,000 new jobs were created.

Some analysts feel this increases the likelihood of a Bank of Canada Policy Rate cut in September.  They put the chances at 40%.  However, Porter and many other economists do not expect July’s sudden jobs decline to change the central bank’s current stance on interest rates.

“[The Bank] will still need to see inflation slow notably over the next two prints for a September cut to be a high likelihood. We expect that the job market slack will put downward pressure on inflation, eventually, supporting the case for a return to modest rate cuts. And it appears that the trade uncertainty will be with us for some time yet,” Porter wrote in a client note.

The central bank has held its trend-setting Policy Rate at 2.75% since March.

Published by First National Financial LP

6 Aug

Residential Market Commentary – Bank of Canada policy rate unchanged

General

Posted by: Frank Fik

The Canadian economy continues to keep policymakers at the Bank of Canada guessing.  The key contributor to the quandary continues to be U.S. tariffs, and that puzzle has just become even more complicated.
As of August first, the U.S. increased its tariff rate on imported Canadian goods to 35%, up from 25%, except for products covered by the CUSMA trade deal.  What that means remains to be seen, but any economic slowdown, inflation or unemployment triggered by the increase will figure into the BoC’s decision-making on its policy rate.
In the meantime, the Bank is monitoring a Canadian economy that has been remarkably resilient in the face of the tariff upheaval, so far.
The Bank of Canada once again held its benchmark, overnight policy rate steady at 2.75%, where it has been since the March setting.  The latest decision follows an increase in the June inflation reading from 1.7% to 1.9%, while core inflation remains stuck at about 3.0%. There was also a surprisingly strong employment report in June, with the economy creating 83,000 new jobs.  As well, expectations for Canada’s gross domestic product remain optimistic.
The latest report from Statistics Canada – which came out after the rate setting – shows GDP dropped 0.1% in May, as it did in April.  But, StatsCan’s early forecast for June suggests an increase and, as a result, GDP growth of 0.1% for the second quarter of 2025.
Market watchers say new data, coming this month, will give the BoC a clearer and truer view of the Canadian economy.  For those who are waiting for further interest rate relief, many of the experts say it will be September, or even October, before the Bank makes another move.
Published by First National Financial LP