The Bank of Canada’s larger-than-normal interest rate cut last month has a lot of market watchers looking for more of the same. Most of the well-known economists are forecasting another 50 basis point cut at the setting in December.
That would drop the central bank’s trend setting Policy Rate to 3.25%, which many analysts see as the high end of the so-called neutral range for the rate.
Neutral rates are deemed to neither discourage nor encourage economic growth. Right now, that range is commonly considered to run between 2.25% and 3.25%.
There are, however, some analysts who see the BoC dropping its Policy Rate to 2.0%, or less, by the middle of next year. They see some lingering, troubling signals coming from the economy:
- Lower than forecast growth in Gross Domestic Product, both this is year and next year
- Higher than forecast unemployment
- A continuing decline in inflation that falls below the BoC’s target range of 1.0% to 3.0%
- On-going “excess supply” in the economy, which indicates more is being produced than consumed. That condition is expected to persist into 2026.
Analysts in the real estate market, especially commercial real estate, say there will need to be another 75 to 175 basis points in rate cuts to get construction and development going again. That would drop the Bank rate to as low as 1.5%.
Published by First National Financial LP