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January 2024 Bank of Canada update

  • 5 min read

In this week’s blog post, I wanted to provide a concise summary regarding the Bank of Canada’s first monetary policy announcement of 2024 which saw them uphold the overnight benchmark interest rate at 5.0%. Below I will do my best to cover all the crucial aspects of the decision and relevant market dynamics.

Key Points:


The Bank acknowledged the ongoing risk of inflation, citing a year-end CPI inflation rate of 3.4%. They expect inflation to hover around 3% in the first half of 2024, gradually easing to reach the Bank’s 2% target by 2025. Notably, shelter costs (mortgage payments) remain a significant contributor to above-target inflation. Be sure to read the attached article on the impact of Interest Rates and Housing from CMHC.

Canadian Economic Performance:

The Bank reported a stall in the Canadian economy since mid-2023, with expected near-zero growth through Q1 2024. Consumer spending has pulled back due to higher prices and interest rates, leading to a contraction in business investment. The labor market has eased, but wages are still rising at a rate of 4% to 5%. You don’t have to be an economist to see things have not been going that great and January’s figures are anticipated to be pretty bleak. Are we in a recession right now? You be the judge.

Canadian Monthly GDP

Global Economic Outlook:

Globally, economic growth is slowing, with the U.S. expected to experience a slowdown in 2024. The euro area is in a mild contraction, China faces constraints due to low consumer confidence, and oil prices are $10 per barrel lower than previously assumed. The Bank forecasts global GDP growth of 2.5% in 2024 and 2.75% in 2025.

Bank of Canada’s Outlook Decision:

The Bank anticipates a gradual strengthening of the Canadian economy around mid-2024. They expect household spending to pick up in the second half of 2024, with exports and business investment benefiting from recovering foreign demand. Tiff Macklem and his Governing Council decided to maintain the policy rate at 5% and continue normalizing the Bank’s balance sheet, expressing ongoing concern about risks to the outlook for inflation.

Housing Outlook:

In 2024, high interest rates will continue to cause a big issue, as they are putting pressure on people’s budgets and making them cut back on spending to afford their mortgages. The expected situation in the Canadian housing market involves a likely drop in fixed mortgage rates because of softer bond yields. This might encourage specific buyers, especially those wanting to time the market’s lowest prices, to participate in the spring market. If you are expecting pandemic style demand in 2024 I would venture to say that isn’t going to happen.

Even though there’s expected to be more houses available early in the year, it’s not anticipated that a lot of people will rush to sell their homes due to higher mortgage rates when it’s time for renewal. The mortgage stress test is seen as something that will help prevent defaults or forced sales.

While families might need to adjust their spending because of higher rates, experts don’t think it will lead to a large number of people selling their homes, which could avoid causing major problems in the market. Additionally, if interest rates go down as predicted, there’s a small expected increase in people wanting to buy homes, particularly in the second quarter of the year.

Bottom line:

Consumers can expect a gradually building momentum in the housing market in 2024, with a focus on the anticipated relief from higher interest rates. It’s a step-by-step journey, and we’ll be walking a bit more before experiencing a more active pace.

What’s Next…

The Bank of Canada’s next upcoming policy interest rate announcement is on March 6, 2024. However, before that, I will attend a private event in Whistler, B.C. this week. The event features keynote speakers including Stephen Poloz, the 9th Governor of the Bank of Canada, Bob Dugan, Chief Economist of CMHC, and Brad Simpson, Chief Wealth Strategist at TD Wealth. The gathering will also include top Mortgage Professionals in Canada for insightful collaborative sessions. I’ll be sure to share valuable insights and how they can assist you and your family in navigating these unpredictable market conditions.

As always, thank you for reading.

Should you have any questions or need further clarification, feel free to reach out anytime.

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