Recently there have been a few notable developments in the Canadian economy.
Inflation and Monetary Policy
In November, Canada’s annual inflation rate decreased to 1.9%, slightly below the anticipated 2%. The Consumer Price Index remained unchanged from October, contrary to expectations of a 0.1% increase. Core inflation measures, such as CPI-median and CPI-trim, held steady at 2.6% and 2.7%, respectively. The Bank of Canada responded by reducing interest rates another 50bps on December 11th, totaling 175 basis points of cuts since June. The market projections suggest a potential additional 25 basis point reduction in January.
Fiscal Policy and Political Landscape
The federal government reported a fiscal deficit of C$61.9 billion for the year ending in March, exceeding projections by 50%, primarily due to pandemic-related expenditures and other one-off costs. This announcement coincided with the resignation of Finance Minister Chrystia Freeland over disagreements on the best path forward for Canada.
Housing Market
The housing sector has shown signs of cooling, with a 3.9% year-over-year decrease in the average home selling price to $724,800 in July 2024. Sales of new condominium units in Toronto continue to struggle, during the first half of the year sales fell by 57% compared to the previous year, marking it the slowest pace in 27 years. Vancouver’s housing inventory increased by 39% year-over-year, surpassing the 10-year average.
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