2023 Ends with Rising GDP
In recent news, the Canadian economy has outpaced growth expectations, showcasing a promising end to the year 2023. Statistics Canada reported a 0.2% rise in GDP for the month of November, marking the first month of growth since May 2023. According to Global News, preliminary estimates for December suggest a potential acceleration in growth to 0.3% on a monthly basis, with official updates expected at the end of February. In light of these positive economic indicators, experts are reconsidering the need for immediate rate cuts by the Bank of Canada.
Rate Cut Expectations
Despite the current key interest rate standing at 5%, the highest since 2001, we anticipate a more measured approach from the Bank of Canada regarding rate cuts. This strategic move would enable the central bank to carefully monitor data, preventing the markets from experiencing another episode of overheating. According to a quote from former Deputy Governor Paul Beaudry, as reported by Bloomberg News, ‘Policymakers will wait until they see underlying price pressures cool, even if the economy has entered a period of excess supply.’ Andrew Grantham from CIBC believes that the Bank of Canada “will be more concerned with upcoming inflation and labour data than GDP figures in gauging how long to keep its policy rate elevated,” as reported by Global News.
Canada’s Housing Crisis
Bank of Canada Governor Tiff Macklem attributes the housing crisis to a supply shortage, emphasizing that it cannot be resolved solely through interest rate adjustments. Macklem advocates for the government to boost housing supply, cautioning, as per CBC News, "policies that increase demand will worsen it." The bank identifies rapidly increasing housing costs as the primary reason inflation exceeds the desired two percent.
IK Financial Mortgage Team operates on behalf of Mortgage Edge. Lic#10680
Sources:
Global News: https://globalnews.ca/news/10262173/canada-november-gdp-data/#
BNN Bloomberg: https://www.bnnbloomberg.ca/rate-cuts-to-start-in-july-former-bank-of-canada-official-says-1.2029044
CBC: https://www.cbc.ca/news/business/tiff-macklem-boc-interest-rates-housing-crisis-1.7101890
Global News: https://globalnews.ca/news/10262173/canada-november-gdp-data/#
BNN Bloomberg: https://www.bnnbloomberg.ca/rate-cuts-to-start-in-july-former-bank-of-canada-official-says-1.2029044
CBC: https://www.cbc.ca/news/business/tiff-macklem-boc-interest-rates-housing-crisis-1.7101890
