Benchmark Rate Now Sits at 3.75%

In a widely expected move, the Bank of Canada has continued the downward trajectory with a jumbo half-point cut to its benchmark interest rate, which now sits at 3.75%. This marks the fourth interest rate cut in a row, thanks to cooling inflation, which fell to 1.6 per cent in September – the lowest it’s been since February 2021.

Interest Rates and the Canadian Housing Market

According to a Leger survey conducted by RE/MAX as part of the 2024 Fall Housing Market Outlook Report, even the mere prospect of lower rates has boosted confidence among first-time homebuyers, with 25 per cent of Canadians actively saving for a home purchase and expressing confidence that they will be able to buy soon. The majority of them are Gen Zs aged 18-24, at 35 per cent.

On the flip-side, today’s lower interest rate may prove too little, too late for some current homeowners, with 14 per cent of Canadians who are up for mortgage renewal feeling that they may need to sell their home in the near future.

Meanwhile, this 50-point rate cut is good news for those who are in the market to buy right now, making borrowing cheaper in conjunction with prices that are still below peak levels and inventory levels up, giving consumers more options in the market and more time to make those critical buying decisions. But how long will these favourable conditions last? Industry experts expect the market to tighten up in the spring, but only time will tell.

The fall market is usually a good early indicator for activity as we look ahead to early 2025, and we’re headed toward more healthy territory. With interest rates starting to ease, buyers are beginning to come off the sidelines. That’s not to say the fall market will be in full swing according to historic standards. Consumers will drive that trend, so we’ll need to see a bigger move by the Bank of Canada for that to happen.

Bank of Canada’s 2024 Policy Interest Rate Announcement Schedule

Bank of Canada announces its decision for the overnight rate target eight times a year, typically on a Wednesday. The schedule for 2024 is as follows:

Wednesday, January 24*

Wednesday, March 6

Wednesday, April 10*

Wednesday, June 5

Wednesday, July 24*

Wednesday, September 4

Wednesday, October 23*

Wednesday, December 11

Read the full interest rate announcement below:

The Bank of Canada today reduced its target for the overnight rate to 3¾%, with the Bank Rate at 4% and the deposit rate at 3¾%. The Bank is continuing its policy of balance sheet normalization.

The Bank continues to expect the global economy to expand at a rate of about 3% over the next two years. Growth in the United States is now expected to be stronger than previously forecast while the outlook for China remains subdued. Growth in the euro area has been soft but should recover modestly next year. Inflation in advanced economies has declined in recent months, and is now around central bank targets. Global financial conditions have eased since July, in part because of market expectations of lower policy interest rates. Global oil prices are about $10 lower than assumed in the July Monetary Policy Report (MPR).

In Canada, the economy grew at around 2% in the first half of the year and we expect growth of 1¾% in the second half. Consumption has continued to grow but is declining on a per person basis. Exports have been boosted by the opening of the Trans Mountain Expansion pipeline. The labour market remains soft—the unemployment rate was at 6.5% in September. Population growth has continued to expand the labour force while hiring has been modest. This has particularly affected young people and newcomers to Canada. Wage growth remains elevated relative to productivity growth. Overall, the economy continues to be in excess supply.

GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower interest rates. This forecast largely reflects the net effect of a gradual pick up in consumer spending per person and slower population growth. Residential investment growth is also projected to rise as strong demand for housing lifts sales and spending on renovations. Business investment is expected to strengthen as demand picks up, and exports should remain strong, supported by robust demand from the United States.

Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. As the economy strengthens, excess supply is gradually absorbed.

CPI inflation has declined significantly from 2.7% in June to 1.6% in September. Inflation in shelter costs remains elevated but has begun to ease. Excess supply elsewhere in the economy has reduced inflation in the prices of many goods and services. The drop in global oil prices has led to lower gasoline prices. These factors have all combined to bring inflation down. The Bank’s preferred measures of core inflation are now below 2½%. With inflationary pressures no longer broad-based, business and consumer inflation expectations have largely normalized.

The Bank expects inflation to remain close to the target over the projection horizon, with the upward and downward pressures on inflation roughly balancing out. The upward pressure from shelter and other services gradually diminishes, and the downward pressure on inflation recedes as excess supply in the economy is absorbed.

With inflation now back around the 2% target, Governing Council decided to reduce the policy rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range. If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further. However, the timing and pace of further reductions in the policy rate will be guided by incoming information and our assessment of its implications for the inflation outlook. We will take decisions one meeting at a time. The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.