Canada’s central bank delivered a harsh reality check for real estate bulls hoping for cuts. The Bank of Canada (BoC) held its overnight rate at 2.25% this morning, citing recent revisions to economic data that show the economy is doing better than expected. However, they view the broader economy not as a typical business cycle contraction, but as a structural shift towards lower growth. This meeting wasn’t just a pause; it was a recalibration of policy that makes this the floor for interest rates.
Bank of Canada Just Found The Floor For Interest Rates
The BoC held the overnight rate, but the real signal wasn’t the move—it was the tone. The pause wasn’t a “wait-and-see” regarding future cuts. Instead, they explicitly called 2.25% “the lower end of the neutral range.” Forget future rate cut guidance—the BoC just informed the market we’re at the interest rate floor.
They further note the current rate provides “some support,” meaning this is a stimulus point. Those expecting lower rates are betting on a complete economic catastrophe.
Canadian Economic Revisions Eliminated BoC Economic Concerns
The BoC’s tone shift was driven by an actual shift in the existing data. At the last rate announcement, the central bank dismissed elevated inflation data in favour of focusing on weak GDP. In November, Statistics Canada published broad revisions to Canada’s economic growth numbers for 2022 to 2024. The revisions suggest the Canadian economy was healthier than previously thought before the country’s trade conflicts.
Governor Macklem explicitly stated these revisions “alter our assessment of potential output.” Ironically, this is further proof that the BoC shouldn’t have been ignoring the inflation data. It was right—the economy was measured incorrectly. They’re now shifting expectations towards that sticky and elevated Core inflation.
Canada Seeing “Structural Shift”: Code For Higher Inflation & Weaker Growth
The most disturbing part of the BoC’s announcement was Governor Macklem dropping the term “structural adjustment.” For those who left their bureaucrat-to-English dictionary at home, the central bank is stating the economy is undergoing permanent shifts, not just a standard business cycle swing. It’s a diplomatic way of saying the economy is fundamentally being reshaped for higher costs and weaker growth that lower rates won’t address.
Overall, the latest announcement crushes near-term expectations of rate cuts. That’s good news in the context of economic growth, as they’re no longer dismissing elevated inflation due to the perception of an overly weak economy. However, this also means the economy isn’t weak enough to justify further easing. For real estate markets, the hope of cheap money fueling a 2026 rally just evaporated.
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