The Canadian economy is experiencing ongoing challenges, even as some sectors show a glimmer of improvement. In the third quarter, home resales and spending on durable goods saw slight upticks, but overall economic growth remains tepid. Canada’s GDP growth has consistently fallen short of the Bank of Canada's (BoC) projections, with GDP per capita witnessing a decline for six consecutive quarters.
Rising Unemployment Rates
Adding to these economic concerns, the labor market is under significant pressure. Unemployment has climbed to 6.8%, marking the highest level since 2017, excluding the pandemic years. For perspective, during similar unemployment rates in 2017, the BoC maintained an interest rate of just 1.00%. In stark contrast, the current interest rate stands at 3.25%.
Inflation Under Control
On a more positive note, inflation seems to be less of a concern for policymakers. For most of 2024, the growth in consumer prices has remained at or below the BoC’s target of 2%. However, the current interest rate is still at the upper limit of the BoC's neutral range (2.25%–3.25%) and significantly higher than the pre-pandemic peak of 1.75%.
What’s Next for Canada’s Economy?
The recent rate cut by the BoC indicates a shift toward a more relaxed monetary policy; however, it does not signify an aggressive push to stimulate the economy just yet. Experts anticipate that further rate cuts may occur, with predictions of the overnight rate dropping below the neutral range to approximately 2% by mid-2025.
As the economy continues to soften, the BoC faces the challenging task of supporting growth while keeping inflation in check. Their cautious strategy suggests a gradual approach to lowering rates, aiming for a balanced recovery in the coming years.
P.S.: If you're considering a move and want professional guidance on your situation, I'm here to help. Just click the contact button on the top right and let's setup a time.
