Bank of Canada holds interest rate at 5% and Windsor-Essex realtor is 'kind of glad it did'
The Bank of Canada held its policy rate at 5 per cent on Wednesday, saying it needs to see a sustained decline in inflation before rate cuts can begin.
“I realize that what most Canadians want to know is when we will lower our policy interest rate,” said Bank of Canada Governor Tiff Macklem. “What do we need to see to be convinced it’s time to cut? The short answer is we are starting to see what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained.”
The central bank projects inflation to ease from 3 per cent earlier in of 2024 to 2.5 per cent by the end of this year. Inflation is expected to return to target by 2025, and fell to 2.8 per cent in February.
Macklem did leave the door open for a possible rate cut in June during a news conference with reporters in Ottawa on Wednesday.
"Yes, it is within the realm of possibilities," he said. "Look, I think we have been pretty clear, we are encouraged by what we have seen since January."
While progress has been made in cooling inflation, costs in services and food remain elevated.
There are also risks that remain that could potentially drive inflation up again.
The central bank is concerned about three main areas that could push inflation higher. House prices could rise more than anticipated due stronger demand on supply. Shelter price inflation remains high at 7 per cent, driven by high mortgage costs and strong growth in rent.
Business experts say holding the rate is a measure to avoid a major spark in an already tight real estate market, which is one factor keeping inflation up.
“Of course they are worried about igniting a spring rally in house prices. If people think rates are coming down, even if it's only a slight drop, if people think, ‘Well that's the story now, it's going to get cheaper. We're going to ask more for our house.’ Some people are going to possibly get into bidding wars anticipating a rise,” said Andrew Bell of BNN Bloomberg.
Windsor-Essex real estate broker Joe Conlon isn’t surprised with the news.
“We expected it to hold and I'm kind of glad it did,” said Conlon, adding that the spring market is seeing bidding wars and price escalation already, even without any rate cuts. “Buyers are starting to get nervous that they're seeing the competition come back right now without the rate drop and if the rates come down too soon, I think their fear is that things are going to get even crazier and out of hand.”
The Bank of Canada’s decision to hold the rate will be painful for people who are coming up on mortgage renewals, Conlon said,
“I kind of feel for them where they're the ones that had locked in low rates about five years ago. But the first time homebuyers those are the ones that are eager for rates to come down, but I don't know if they should be so eager,” he said.
The average sale price for a home in Windsor-Essex in March was $563,309, a marginal decrease from the previous month.
House sales were down 10.29 per cent in March and listings dipped 4.39 per cent.
“If you cut too soon, you're just going to put yourself right back in a situation in which we found ourselves with things going up and up and up, and all of a sudden quickly,” said Christian Conlon, a real estate agent with the Joe Conlon Real Estate Team. “People start to find out that it's not going to stay this way and at some point, something's got to change.”
A rate cut is widely anticipated in either early June or July.
—With files from CTVNews.ca
CTVNews.ca Top Stories
Mystik Dan wins the 150th Kentucky Derby at Churchill Downs in a three-horse photo finish
Mystik Dan won the 150th Kentucky Derby in a photo finish, edging out Forever Young and Sierra Leone for the upset victory.
Bodies recovered in Mexico likely 2 Australians, 1 American who went missing: officials
Three bodies recovered in an area of Baja California are likely to be those of the two Australians and an American who went missing last weekend during a camping and surfing trip, the state prosecutor’s office said Saturday.
No proof man lied to brother about number of kittens born in litter, B.C. tribunal rules
A man was denied a $5,000 payout from his brother after a B.C. tribunal dismissed his claim disputing how many kittens were born in a litter.
Princess Anne lays wreath at B.C. veteran's cemetery; receives 21-gun salute
Princess Anne paid tribute to veterans buried at a cemetery in British Columbia today, laying a wreath to honour the more than 2,500 military personnel and family members buried there.
Auston Matthews returns for Game 7, but Leafs minus injured goaltender Joseph Woll
Maple Leafs centre Auston Matthews returned to the lineup for Game 7 against the Boston Bruins on Saturday night.
'I just can't believe that it took so long': Body found in wreckage 3 months after deadly fire
A man accused of arson in a January Old Strathcona apartment fire is expected to be charged with manslaughter after a body was discovered in the burned building late last month.
Quebec police hand out hundreds of tickets to Hells Angels and other bikers before 'first run' meeting
Quebec provincial police handed out hundreds of fines to Hells Angels members and other supporting motorcycle clubs who met for their 'first run' in a small town near Sherbrooke, Que.
Work stoppage possible as WestJet issues lockout notice to maintenance engineers' union
A lockout notice issued by WestJet to a union representing aircraft maintenance engineers could result in a work stoppage next week.
London Drugs begins 'gradual reopening' on 7th day after cyberattack
Almost a week after all London Drugs stores across Western Canada abruptly closed amid a cyberattack, they began a "gradual reopening" on Saturday.