Rate Cut or Not Tomorrow?

❓ Will BoC Cut Rates Again?

• Canada’s inflation rate dropped to 2.3% in March, down from 2.6% in February.

• Analysts had expected inflation to rise to 2.7%, but lower gas, airfare, and travel prices pulled it down.

• Core inflation also cooled slightly to 2.85%, with a 3-month average of 2.74%, down from 3.32%.

• Markets see a 45% chance of a rate cut at tomorrow’s BoC meeting, up from 35% after the inflation release.

• A rate cut tomorrow would mark the eighth straight rate cut by the Bank of Canada.

Why This Matters: Canada is expected to face higher prices due to retaliatory tariffs on $60B worth of U.S. goods, but for now, the data support a rate cut. Based on previous rate cuts, an additional rate reduction will unlikely spur activity in the housing market. Ongoing tariff tensions will also raise construction costs, impacting new development feasibility.

🏢 Weak Canadian Dollar Fuels Office Demand

• A weaker CAD makes Canadian real estate more affordable to foreign investors, especially from Europe and Asia.

• U.S. companies may also find setting up operations in Canada cheaper, boosting office and industrial space demand.

• Despite federal restrictions on foreign investment, lower interest rates, falling inflation, and a weaker currency make Canada more attractive overall.

• The Bank of Canada is expected to cut rates three more times, while the Fed may not cut at all—widening rate differentials and weakening the CAD further.

• However, a prolonged weak dollar could limit the BoC’s room to cut rates, potentially constraining monetary policy in the long term.

Why This Matters: Foreign buyers could return to the Canadian market, especially in commercial real estate. Expect higher demand for industrial and office properties, particularly from U.S. and overseas firms. Canadian investors may face more competition but could benefit from a stronger leasing market as businesses expand.

🔥 Northern Ontario Fire Sale Begins