This morning, the Bank of Canada trimmed interest rates for a fifth consecutive time as the country's economy grows at a slower pace than expected. 

The 50bps cut (or 0.50%) was largely expected by analysts and economist, as Canada's GDP grew by only 1% in Q3 2024, and Q4 2024 is looking much weaker than projected.

Not only that, but Canada's unemployment rate also rose to 6.8% in November, making it tough for those who are looking for work, especially those younger and newcomers. 

BMO chief economist expects that to increase further, averaging 7.0% in Q1 2025, before receding slightly. Further complications to the Canadian economy are clouded by uncertain US tariffs that were threatened, which would also further weaken the Canadian dollar (currently 0.71 CADUSD at time of writing). Further Details.

The silver-lining in this is that cost for housing as improved, as well as the larger inflation picture for goods and services across the country... What this could do for Alberta, and Calgary could potentially mean a more balanced market into the new year (i.e., further demand for housing driven by lowered interest rates but offset by the impact of unemployment, and lower population growth). That said, there still remains consistent demand in Calgary for homes priced under $600K, and more a buyers' market for anything above $700K, for now.

The next BoC rate announcement will be on January 29, 2025. 

Additional inflation data will be released over the next few weeks for an update on November figures.

Announced yesterday, Canada's inflation rate INCREASED more than expected in October (+2.0% month-over-month), as compared to September (+1.6%). 

This rate of price growth (inflation) is a KEY measurement tool for the Bank of Canada to decide on it's interest rate policy, and has been the main focus since Canadians have been feeling the pinch in inflation, from groceries, gasoline, and ultimately real estate prices. 

The announcement, although disappointing to the BoC, followings a string of reports of better-than-expected performance to it's interest rate policies.

Although a mixed bag of estimates, the general consensus is for the BoC to trim interest rates FURTHER on December 11, 2024 (next BoC rate meeting announcement). The question becomes - by HOW MUCH will the BoC trim interest rates? For now, banks and economists are expecting a 25 to 50 bps reduction (or 0.25% to 0.50% cut). This would bring the BoC policy rate down to either 4.0% or 3.75% in December (isn't that a relief? We haven't seen rates with a 3-handle for some time now!). 

Below is the relationship between interest rates and inflation in summary:

With the change in interest rates, here's a rough relationship between detached home prices in Calgary and policy rates:

Only time will tell how the rate cuts will impact our real estate market here in Calgary, but industry expects a ramp-up of demand following this last rate cut of the year, and setting us up for high demand in the Spring. 

Reach out if you have any questions, or are curious on how you're best positioned on this evolving market on both the buying and selling side.