The Bank of Canada has cut its benchmark interest rate by another 25 basis points to July 25, 2024.
This is the second consecutive 25 basis point rate cut since the last one in June, and the current rate is 4.5%.
The policy decision was likely driven by slowing economic growth in Canada,
with the June inflation rate of 2.7% (compared to 8.1% in June last year), slightly above the 2% target, but reflecting expectations that inflation will trend downward.
This means that unless inflation is on a downward trajectory, it may be difficult to cut the benchmark interest rate.
Canadian economic growth in the first half of 2024 is expected to be 1.5%, which remains below the global growth rate of 3%.
For reference, the US has not yet cut interest rates, and there are various scenarios, including two rate cuts in September and November and one rate cut later in the year.
Some observers believe that the U.S. is in no hurry to cut rates due to strong economic growth, and the U.S. is cautious due to the November presidential election.
While it is difficult for other countries to cut interest rates while the U.S. rate remains unchanged,
European central banks, like Canada’s, have been cutting rates as their economies show signs of slowing growth, and the European Central Bank cut its key interest rate by 25 basis points last month to 4.25%.
The next announcement on Canada’s benchmark interest rate is scheduled for September 4th.
Vancouver, Canada Real Estate Market Outlook
Currently, the Vancouver real estate market is experiencing a bit of a slowdown, with only well-located and well-priced units selling well.
This is due to the fact that the benchmark interest rate has been lowered, but it is still in the high 4% range, and some buyers are taking a wait-and-see approach
with the expectation that the market interest rate will decrease further in the future.
Of course, if the interest rate is expected to decrease in a trend, it is expected to gradually revitalize the Vancouver real estate market.