Jon Sowerby

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty. The Bank’s April outlook assumes tariffs remain unchanged and the global benchmark price of oil declines to US$75 per barrel by mid 2027.

The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide. In the United States, growth is still expected to be solid over the projection horizon, boosted by AI-related investment and consumption growth. China’s economy is being supported by robust exports. In the euro area, higher prices for oil and natural gas will weigh on economic activity.

Financial conditions have been volatile, reflecting daily developments in the Middle East and shifting market expectations for inflation and interest rates. Bond yields are modestly higher since January while equity markets, which weakened sharply at the outset of the war, have recovered. Since the start of the war, the US dollar has appreciated against most major currencies. The Canada-US exchange rate has been relatively stable.

Overall, the global economy is expected to grow by about 3% in 2026, 2027 and 2028. Projections for inflation over the next year are revised up because of the jump in energy prices.

• Weaker-than-expected performances in 2025Q4 and especially 2026Q1 have prompted a steep downgrade to our forecasts for 2026 annual average Canadian home resales and price growth. While severe weather in Central and Atlantic Canada weighed on activity early in the year, weakness was also evident in B.C., where conditions were more temperate. Sales are likely to take most of the year to recoup first quarter losses, as housing remains constrained by a subdued economy, heightened uncertainty, and ongoing cost of living pressures.
• Interest rates are expected to be a largely neutral factor for the outlook in 2026, with the Bank of Canada likely to remain on hold and no major movements expected in bond yields (which help determine fixed mortgage rates).
• Canada’s population declined last year for the first time since Confederation, driven by losses in Ontario and B.C.. Softer rental demand and falling rents are discouraging investor activity in both provinces. Alberta stands out, with the strongest population growth nationally, supported by immigration. Interprovincial migrants continue to flow into the province, bolstering ownership demand.

The number of home sales recorded over Canadian MLS® Systems was virtually unchanged (-0.1%) on a month-over-month basis in March 2026.

“Home sales activity remained at lower levels in March, as rising global economic uncertainty, along with a mid-month jump in fixed mortgage rates tied to incoming higher inflation, piled on to an already shaky economic start to the year,” said Shaun Cathcart, CREA’s Senior Economist. “2026 is still expected to see a modest amount of upward momentum in sales and a stabilization in prices as some pent-up first-time buyer demand enters the market, but the forecast for the year has had to be revised downward. The timing of higher mortgage rates, along with the perception they may be temporary, could keep would-be buyers away at the most active time of year – April, May, and June – as they wait for rates to come back down.”

March Highlights:

• National home sales were almost unchanged (-0.1%) month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 2.3% below March 2025.
• The number of newly listed properties edged down 0.2% on a month-over-month basis.
• The MLS® Home Price Index (HPI) fell 0.4% month-over-month and was down 4.7% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was down 0.8% on a year-over-year basis in March 2026.