CEO weighs in on Bank of Canada thinking ahead of rate decision

Industry veteran outlines possibilities

CEO weighs in on Bank of Canada thinking ahead of rate decision

Given current conditions, the Bank of Canada’s final interest rate announcement for 2023 is shaping up to be another “hold” decision, according to

“It seems certain that the Bank of Canada will hold the key overnight rate next week,” said James Laird, co-CEO of

“While the bank continues to keep the possibility of further rate hikes on the table, recent commentary suggests rate hikes are likely over as long as inflation continues to trend in the right direction. Assuming the hikes are over, the next question is if and when cuts may occur.”

However, multiple indicators point to an ongoing persistence in inflation, the central bank said in its summary of deliberations covering its previous policy announcement.

“The stickiness in core inflation measures reflected the fact that excess demand remained in the system or that inflation could be becoming entrenched,” the BoC said.

“Wage growth, if sustained at the current pace of 4% to 5%, would be inconsistent with restoring price stability… [Governing Council] agreed they would be watching closely to see if higher labour costs began to be reflected in renewed inflationary pressures.”

What are the likely trends in mortgage rates?

Anticipation of potential rate cuts is applying a downward pressure on bond yields, in turn leading to a steady decline in fixed rates since the last BoC announcement, Laird said.

“Anyone with a variable-rate mortgage or home equity line of credit (HELOC) will be looking for hints as to when the bank might cut rates next year,” he added. “Anyone choosing between a fixed and variable rate at the moment would only consider a variable rate if they are open to more risk and have conviction that the bank is finished or close to finished hiking rates.”

Laird noted that higher lending rates are finally “biting” into the housing market, as reflected in the recent decline in prices and sales.

Toronto-Dominion Bank’s latest projection has pegged home prices falling by as much as 10% in Q1 2024, a more significant drop compared to the 5% prediction in its prior assessments in September and October.