Statistics Canada’s recent report has shown a deceleration in inflation despite ongoing price pressures. The large rate hikes in 2022 from the Bank of Canada (BoC) have brought inflation down from a peak of 8.1% y/y in June to 5.9% last January. Although prices for cellular services and passenger vehicles have helped bring down the all-items CPI (Consumer Price Index), the growth of mortgage interest costs and food prices continue to rise.
The unprecedented rise in interest rates last year discouraged buyers in the market, causing a large decrease in home sales since the pandemic. The Canadian Real Estate Association reported January to be the month with the lowest record of home sales since 2009, falling 37.1% from a year ago. The Aggregate Composite MLS® HPI sits at 15% below its peak in February 2022.
In January, the number of newly listed homes rose 3.3% from the previous month led by increases across British Columbia. The sales-to-new listings ratio dropped to 50.7% compared to 54.4% last December.
According to Chief Economist Dr. Sherry Cooper, there is “virtually no chance of any rate cuts this year despite inflation forecasts moving in the right direction”. The BoC announced that no action will be taken at their next meeting on March 8th. Economists predict that inflation will be down to 3% by the end of this year. Despite the deceleration in inflation, getting back down to the 2% target will have its challenges.
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