As most analysts were expecting, the Bank of Canada (BOC) announced its second interest rate increase of 50 basis points bringing the rate to 1.5%. BOC is expected to continue upward rate increases for some time to come.
Continued slowing down of the world economy driven by rising energy and food prices is contributing to the broadening of inflation worldwide.
Canadian Consumer Price Index (CPI) has touched 6.8% in the last month, April 2022, which is well above the BOC’s forecast. The majority of CPI categories (70%) have shown inflation above 3% while the core categories show inflation in the range of 3.2% and 5.1%.
We are living in a global village and our economies are interconnected, developments happening on the far end of the planet hit us hard at home. The Russian invasion of Ukraine COVID-19 lockdowns is disrupting the world supply chain and contributing to the slowdown of economies and increasing inflation.
The good news about the Canadian economy is that it is running in excess demand. Businesses are reporting a shortage of labour force. Housing marketing is easing off after touching its peak recently. According to BOC robust consumer spending along with exports is expected to be gaining momentum, and second-quarter growth is expected to be strong.
According to the subject experts, BOC is looking to continue its rate increases to achieve a target inflation rate of 2%.
So, looking at the forecast on rates, the common question is WIFM (What’s In It For Me)?
There are always two sides to a coin, on one side the rate increase would affect the borrowing power of home-buyers and would limit the maximum home price they can buy their dream home. On the other hand, the home prices are settling down after seeing craziness in the market. The increase has been due to the natural supply and demand scenario but, in my opinion, multiple blind bidding contributed to the artificial increase in the home prices.
The big question remains, is it time to buy now or sell your home?
If you have any questions or would like to discuss your unique needs and goals, please don’t hesitate to contact me at 416-908-5600. I’m here to help you find the perfect, tailor-made solution.
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A. Q. Mufti
Your Trusted Realtor in Mississauga, Oakville, Milton and beyond.
