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When the leaves start to turn and the mercury begins to drop, mortgage rates might be lower, too, one economist predicts.
Capital Economics is sticking to its prediction that the central bank will slash its policy rate in October — and increasingly, other observers are opening up to the possibility.
In fact, more than 60 percent of experts recently polled agree the next move from the Bank of Canada is a cut.
Capital Economics’ prediction follows the Bank of Canada’s decision this week to hold its mortgage-influencing rate at 1.75 percent, where it has remained since October 2018.
“Although the tone of Bank of Canada’s monetary policy statement remained fairly neutral, its updated forecasts suggest that the Bank is losing faith in the economy’s short-term prospects,” writes Stephen Brown, Capital Economics senior Canada economist, in a response to the Bank of Canada’s decision.
The central bank is projecting more modest economic growth in the second half of the year than earlier anticipated. It’s also scaled back its global outlook, notes Brown, highlighting international trade conflicts.
The Bank of Canada is singing a different tune these days than it was last year, when it appeared as though it would remain on a path of monetary-policy tightening by further hiking its policy rate.
Beginning in the summer of 2017, the Bank of Canada started increasing the policy rate from a historically low 0.5 percent after seeing signs of economic recovery. For years the bank had maintained rock-bottom rates to boost the economy as a struggling energy sector limited growth.
While the Bank of Canada has changed its tone since late 2018, when future hikes seemed a sure thing, policymakers views are “mainly positive” in terms of local affairs, suggests Capital Economics.
In particular, the central bank referred to the performance of the housing market as a general positive.
“At the national level, the housing market is stabilizing, although there are still significant adjustments underway in some regions. A material decline in longer-term mortgage rates is supporting housing activity,” the Bank of Canada says in its rate announcement.
