When the Federal Government announced its two-month GST moratorium for some products, along with its spring rebate cheques for qualifying Canadian workers, economists studied the impact that could have on interest rates. The Bank of Canada’s next announcement on rates is scheduled for December 11.
As reported by Yahoo Finance Canada’s John McFarlane, CIBC economists believe the Bank will cut the rate by another 0.50 per cent in December, to 3.25 per cent, and expects that it will go as low as 2.25 by the middle of next year. If the rate drops again in December, as many analysts expect it will, that would make five straight cuts since June 4. The first three were by 0.25 per cent and the fourth, in October, was by 0.50 per cent.
CIBC chief economist Avery Shenfeld wrote that the federal government’s GST and rebate cheques are “not material enough” to alter the projections. His colleague, economist Ali Jaffery, wrote in “reading the tea leaves” that inflation has dropped faster than the Bank expected and while that’s “not massive…it’s material.”
Interest rates, of courses can have a significant impact on real estate. How house prices respond to rate cuts is more difficult to model, according to CIBC, which used an in-house artificial intelligence pool to project what the Bank of Canada will do next.