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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 outlook for the global and Canadian economies is little changed relative to the projection in the October Monetary Policy Report (MPR). However, the outlook is vulnerable to unpredictable US trade policies and geopolitical risks. Economic growth in the United States continues to outpace expectations and is projected to remain solid, driven by AI-related investment and consumer spending. Tariffs are pushing up US inflation, although their effect is expected to fade gradually later this year. In the euro area, growth has been supported by activity in service sectors and will get additional support from fiscal policy. Chinas GDP growth is expected to slow gradually, as weakening domestic demand offsets strength in exports. Overall, the Bank expects global growth to average about 3% over the projection horizon. Global financial conditions have remained accommodative overall. Recent weakness in the US dollar has pushed the Canadian dollar above 72 cents, roughly where it had been since the October MPR. Oil prices have been fluctuating in response to geopolitical events and, going forward, are assumed to be slightly below the levels in the October report. https://www.bankofcanada.ca/2026/01/fad-press-release-2026-01-28/

The Canadian Real Estate Association (CREA) has updated its 2026 forecast for home sales activity and average home prices via the Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations and extended the outlook to include 2027. One year ago, expectations were that 2025 would mark a turning point, with buyers beginning to come off the sidelines after a significant slowdown across many Canadian housing markets. That slowdown coincided with the Bank of Canadas use of higher interest rates to fightand ultimately winits first battle with inflation since adopting its inflation-targeting mandate in 1992. While the economic uncertainty resulting from U.S. tariff threats ultimately resulted in another slow year for housing in 2025, most of that weakness was front loaded in the first months of the year. Beginning in April, the market underwent a rally that saw sales climb 12% by August. While this slowed into more of a holding pattern to finish the year, its that mid-year upward trend that is expected to pick up once again in 2026. A major factor underpinning this forecast for higher activity in 2026 is pent-up demand, particularly from first-time buyers, many of whom have been shut out of the market over the past four years. While interest rates have not fallen as far as many may have hoped for, they have likely fallen far enough to restore the attainability of homeownership for many, despite affordability that remains more challenging than it was prior to 2020. https://www.crea.ca/media-hub/news/crea-downgrades-resale-housing-market-forecast-amid-tariff-uncertainty-and-economic-uncertainty/