Earlier this year in June, the headline Consumer Price Index (CPI) rose to 8.1% , marking the largest yearly increase since 1983. Since then, there has been a steady decrease in the CPI down to 6.9% in September. The latest StatsCanada report from October 2022 revealed that the CPI inflation rate remained at 6.9%. Although price pressures seem to have reached a peak, core inflation still remains high. The BoC (Bank of Canada) has acknowledged this tightening cycle will soon come to an end - however, until that time comes it is necessary for rates to rise further in order to reach the 2% inflation target.
Due to the large rate hikes made by the Bank of Canada earlier this year, the housing correction has continued into October but at a much slower pace. The sales -to -new listings ratio fell to 51.6% compared to 52% in September. According to the Aggregate Composite MLS® Home Price Index (HPI), October showed the smallest decline since June, falling to 1.2% month-over-month.
The current policy rate is at 3.75%. Based on predictions from economists, there is a 50/50 chance we can expect either a 25 bps or 50 bps rate hike. The next interest rate announcement by the BoC is on December 7th. Chief economist Dr. Sherry Cooper expects the “policy target to peak at about 4.5% in early 2023 and to remain at that level for an extended period despite triggering a mild recession in early 2023.”
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