By Indradip Ghosh
BENGALURU, December 5 (Reuters) – The Bank of Canada will hold its overnight rate on December 10, according to all economists polled by Reuters, a majority of whom predicted steady rates at least until 2027.
With inflation easing and firmly within the central bank’s target range and the economy growing at a robust pace, the need for further rate cuts has reduced significantly.
Canadian home sales also regained momentum in October, suggesting low borrowing costs are helping the interest-rate-sensitive housing market, though further help from the central bank will be limited.
The BoC will keep the rate steady at 2.25% next week, according to all 33 economists in the December 2-5 Reuters poll, in line with market pricing.
After delivering 275 basis points of rate cuts, one of the most aggressive among G10 economies, the central bank signaled a halt in rate cuts in October, citing stable inflation.
“With the Bank (BoC) all but signalling that it believes it is done cutting rates, it’s only natural that thoughts are now turning to when it may start going in the other direction,” said Douglas Porter, chief economist at BMO Capital Markets.
“Given that the dark cloud of trade uncertainty is still hanging over the economy, and likely will continue to do so through much of 2026, we believe it’s far too early for rate-hike talk.”
A majority of economists, 18 of 29, predicted the BoC will hold rates steady at least until 2027.
That stable rate outlook partly hinges on an economy that has shown resilience in the face of U.S. tariffs, expanding at a better-than-expected 2.6% last quarter, boosted in part by government spending.
LOW RATES TO BOOST HOUSING
Despite massive rate cuts from the BoC, the housing market has broadly struggled this year with home prices declining around 3.2% so far.
But that fall is likely to stall soon, with prices forecast to rise 1.8% and 3.5% on average next year and in 2027, respectively, according to medians from a separate Reuters survey of 14 analysts.
Nine of 11 analysts in that poll said affordability for first-time homebuyers will also improve over the coming year.
“The BoC’s interest rate cuts in September and October further improved affordability for buyers, lowering ownership costs at a time when home values have moderated in parts of the country in the past year,” noted Robert Hogue, assistant chief economist at RBC.
“Rate reductions will likely draw more buyers to the market, unlocking some pent-up demand accumulated during the period of elevated borrowing costs.”
The latest federal budget, Mark Carney’s first as prime minister, proposed a total investment of C$280 billion, which includes C$25 billion in housing, over the next five years.
A strong majority of analysts, 8 of 10, who answered an additional question said the government initiatives in the recent budget to help build more homes and alleviate housing supply issues were a step in the right direction.
While two said they were nowhere near enough, none chose “helpful” or “very helpful”.
“It is helpful to see a commitment by governments to take funding social housing seriously, though the quantum of funding so far is weak,” said Peter Norman, chief economist at Altus Group.
“The 2025 budget will do little to assist in improving the currently stressed economics of improving new market housing supply in the major markets.”
(Other stories from the Reuters global economic poll)
(Reporting by Indradip Ghosh; Additional reporting by Mumal Rathore; Polling by Jaiganesh Mahesh and Reshma Ann Samuel; Editing by Hari Kishan, Alexandra Hudson)
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