Neighbourhood Watch
The Bank of Canada and Federal Reserve often have a similar policy interest rate, and a major reason why is that if interest rates diverge too much between Canada and the US, capital will move in greater numbers to the country with higher interest rates and away from the country with lower rates. This will push the currency value of the country with lower rates down and increase the cost of imports, which is essentially importing inflation. For that reason, neither nation wants to have rates too much lower than the other.
The Bank of Canada does have some wiggle room though as it navigates an economy that has cooled more quickly than in the US, and there are some key historical differences that can help inform today. The biggest difference is that the Bank of Canada has more leverage than the Federal Reserve, because most Americans choose 30 year mortgages while most Canadians choose five years. This means that every increase (or decrease) in interest rates in Canada has a larger effect than in the US. As such, US rates generally peak higher than in Canada as they have in this cycle, and end up cutting to a lower level in the US as well. The spread between the two nations has rarely been above 100 basis points over the past 25 years, so don’t expect the Bank of Canada to cut rates very much until the Federal is ready to cut as well.
Twice a year, rennie intelligence produces the rennie landscape, which tracks a variety of demographic and economic indicators that directly and indirectly influence the housing markets of Metro Vancouver, Greater Victoria, and the Central Okanagan. Our goal is to provide our community with a basis for evaluating the trajectory of the factors that collectively define the context of the real estate market.
Our rennie intelligence team comprises our senior economist, market analysts, and business intelligence analysts. Together, they empower individuals, organizations, and institutions with data-driven market insight and analysis. Experts in real estate dynamics, urban land economics, the macroeconomy, shifting demographics, and data science, their industry-leading data acquisition, analytical systems, and strategic research supports a comprehensive advisory service and forms the basis of frequent reports and public presentations, covering the Vancouver, Kelowna, Victoria, and Seattle marketplaces. Their thoughtful and objective approach embodies the core values of rennie.
