Bank of Canada Rate Announcement Mar 6th, 2024

Josh Perez • March 6, 2024

Bank of Canada maintains policy rate, continues quantitative tightening.


FOR IMMEDIATE RELEASE


Media Relations

Ottawa, Ontario

March 6, 2024


The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.


Global economic growth slowed in the fourth quarter. US GDP growth also slowed but remained surprisingly robust and broad-based, with solid contributions from consumption and exports. Euro area economic growth was flat at the end of the year after contracting in the third quarter. Inflation in the United States and the euro area continued to ease. Bond yields have increased since January while corporate credit spreads have narrowed. Equity markets have risen sharply. Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR).


In Canada, the economy grew in the fourth quarter by more than expected, although the pace remained weak and below potential. Real GDP expanded by 1% after contracting 0.5% in the third quarter. Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment. A strong increase in exports boosted growth. Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing. Overall, the data point to an economy in modest excess supply.


CPI inflation eased to 2.9% in January, as goods price inflation moderated further. Shelter price inflation remains elevated and is the biggest contributor to inflation. Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average. The Bank continues to expect inflation to remain close to 3% during the first half of this year before gradually easing.


Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation. Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.


Information note

The next scheduled date for announcing the overnight rate target is April 10, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

Josh Perez
GET STARTED

Bank of Canada Rate Announcement Jul 30th, 2025

By Josh Perez • July 30, 2025
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario July 30, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. While some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and US trade actions remain unpredictable. Against this backdrop, the July Monetary Policy Report (MPR) does not present conventional base case projections for GDP growth and inflation in Canada and globally. Instead, it presents a current tariff scenario based on tariffs in place or agreed as of July 27, and two alternative scenarios—one with an escalation and another with a de-escalation of tariffs. While US tariffs have created volatility in global trade, the global economy has been reasonably resilient. In the United States, the pace of growth moderated in the first half of 2025, but the labour market has remained solid. US CPI inflation ticked up in June with some evidence that tariffs are starting to be passed on to consumer prices. The euro area economy grew modestly in the first half of the year. In China, the decline in exports to the United States has been largely offset by an increase in exports to the rest of the world. Global oil prices are close to their levels in April despite some volatility. Global equity markets have risen, and corporate credit spreads have narrowed. Longer-term government bond yields have moved up. Canada’s exchange rate has appreciated against a broadly weaker US dollar. The current tariff scenario has global growth slowing modestly to around 2½% by the end of 2025 before returning to around 3% over 2026 and 2027. In Canada, US tariffs are disrupting trade but overall, the economy is showing some resilience so far. After robust growth in the first quarter of 2025 due to a pull-forward in exports to get ahead of tariffs, GDP likely declined by about 1.5% in the second quarter. This contraction is mostly due to a sharp reversal in exports following the pull-forward, as well as lower US demand for Canadian goods due to tariffs. Growth in business and household spending is being restrained by uncertainty. Labour market conditions have weakened in sectors affected by trade, but employment has held up in other parts of the economy. The unemployment rate has moved up gradually since the beginning of the year to 6.9% in June and wage growth has continued to ease. A number of economic indicators suggest excess supply in the economy has increased since January. In the current tariff scenario, after contracting in the second quarter, GDP growth picks up to about 1% in the second half of this year as exports stabilize and household spending increases gradually. In this scenario, economic slack persists in 2026 and diminishes as growth picks up to close to 2% in 2027. In the de-escalation scenario, economic growth rebounds faster, while in the escalation scenario, the economy contracts through the rest of this year. CPI inflation was 1.9% in June, up slightly from the previous month. Excluding taxes, inflation rose to 2.5% in June, up from around 2% in the second half of last year. This largely reflects an increase in non-energy goods prices. High shelter price inflation remains the main contributor to overall inflation, but it continues to ease. Based on a range of indicators, underlying inflation is assessed to be around 2½%. In the current tariff scenario, total inflation stays close to 2% over the scenario horizon as the upward and downward pressures on inflation roughly offset. There are risks around this inflation scenario. As the alternative scenarios illustrate, lower tariffs would reduce the direct upward pressure on inflation and higher tariffs would increase it. In addition, many businesses are reporting costs related to sourcing new suppliers and developing new markets. These costs could add upward pressure to consumer prices. With still high uncertainty, the Canadian economy showing some resilience, and ongoing pressures on underlying inflation, Governing Council decided to hold the policy interest rate unchanged. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs related to tariffs and the reconfiguration of trade. If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases from tariffs and trade disruptions are passed on to consumer prices; and how inflation expectations evolve. We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled. Information note The next scheduled date for announcing the overnight rate target is September 17, 2025. Read the July 30th., 2025 Monetary Report

Exploring Opportunities in Bungalow Conversions Amid Rising Interest Rates

By Josh Perez • July 28, 2025
As interest rates continue to rise, the real estate market is seeing some major shifts. While the rapid growth of property values we saw in 2020 and early 2021 may feel like a distant memory, there are still opportunities for savvy investors to make profitable moves. One strategy I’ve been closely examining involves bungalow conversions, a trend that thrived when interest rates were at historical lows but is still relevant in today’s market with the right approach. The Bungalow Conversion Trend Back in the peak of the market—when interest rates were at rock-bottom levels—investors were purchasing bungalows in the $500,000 to $700,000 range, adding significant renovation costs (sometimes $100,000, $150,000, or even $200,000), and converting them into multi-unit properties. These properties would often see their value skyrocket, with two units bringing in over $1 million on the market. This surge was fueled by the low interest rates, often between 1.5% and 2.5%, which made it easier for investors to carry larger mortgages. With rental income supporting mortgages of $800,000, investors could break even or even cash flow a bit, making the bungalow conversion strategy an attractive option. The Shift: Rising Interest Rates Fast forward to today, and interest rates have climbed significantly, ranging between 5% and 6%. This change in the lending landscape has made it harder for many investors to cash flow properties in the same way they did a few years ago. With higher mortgage payments, properties that once offered positive cash flow are now operating at a loss. But there’s still a way to make this strategy work—by adding more rental income streams. The key is increasing the number of units within the property. Running the Numbers: Maximizing Rental Income Let's break down how adding a third rental unit to a property can still make bungalow conversions profitable in today’s market. Main Floor Unit (3-bedroom) : If this unit rents for around $2,300 per month, that’s a solid start. Basement Unit : Depending on the property and its location, basements can typically rent for $1,600 to $2,000 per month. Let’s take an average of $1,800 for this example. Detached Garage Unit : A separate garage can be converted into a rentable unit, bringing in an additional $1,700 to $1,800 per month. By adding a third unit, the total monthly rental income could reach up to $6,000, or more. This significantly changes the cash flow dynamic. For a property with a mortgage of $800,000 to $900,000 at today’s rates, the added rental income can offset the higher mortgage payments, allowing the property to cash flow positively rather than negatively. The Bottom Line While the rising interest rates have made it more challenging to generate positive cash flow from traditional rental properties, the bungalow conversion strategy remains a powerful tool for investors. By converting a single-family home into a multi-unit property—whether by utilizing basements or adding a detached garage unit—you can create multiple streams of rental income that make the property viable, even in today’s higher-rate environment. In summary, the strategy is still worth exploring. With the right renovations and rental income projections, you can still cash flow and potentially see a great return on investment in today’s market. The key is running the numbers, understanding your rental potential, and adapting to the changing landscape of real estate financing.