EXECUTIVE SUMMARY
The first quarter of 2025 brought a complex macroeconomic landscape, marked by shifting trade dynamics and rising protectionism. These trends signal tighter household and small business spending. The April 16th announcement from the Bank of Canada brought with it a hold to the current rate of 2.75%. I believe this was not so much to dismiss the prioritizing of economic growth amid trade war over potential tariff-driven inflation spikes, but perhaps a signal that a further cut at this time may not make much of a difference at all. With the April CPI release on May 20, we expect higher inflation as U.S. tariffs hit Canadian imports and Canada considers retaliatory measures. Analysts predict further pressure on the Bank of Canada to lower rates, with some forecasting a total of 100 basis points in cuts this year. So, maybe keeping our interest rate “powder dry” is the best approach.
– BEN WILLIAMS Personal Real Estate Corporation & Executive Vice President
INTEREST RATES
April 16th 2025, the Bank of Canada held its benchmark key policy rate at 2.75 per cent hitting pause on its easing campaign after seven consecutive cuts.
GDP / TARIFF
March 28th Stats Canada commented that “real gross domestic product rose 0.4 per cent in January, but the agency’s flash estimates for February suggest flat growth for the month”. “We expect that tariffs will have a clearer negative impact on GDP numbers for March and during Q2,” – Andrew Grantham, Senior Economist at CIBC
BOND MARKET
“Fortunately, there’s more fiscal room in Canada to play with but the willingness of investors (especially those abroad) to fund evermore debt is unclear.” The example of the German bond market March 2025 demonstrates what large swings in the fiscal balance can mean for sovereign borrowing costs.
INFLATION
Statistics Canada on Tuesday April 15th posted that Canada’s annual inflation rate for March was 2.3 per cent – down from 2.6 per cent in February. Canadian consumer prices unexpectedly cooled and “the two biggest contributors to the downside surprise — gasoline and airfares — are the result of tariff-related concerns about global growth and Canadian travellers boycotting travel to the US,” said Kyle Chapman, FX markets analyst at Ballinger Group
THE REAL ESTATE MARKET
CMHC released its Housing Market Forecast in February 2025 citing foreign trade and immigration changes as major influencers of uncertainty. Predicting that housing starts will slow down from 2025 to 2027 due to fewer condominium apartments being built, their belief is that total starts will still remain above the 10-year average.
Among Canada’s big cities Vancouver recorded a 59% decrease in starts driven lower by decreases in multi-unit starts.
