While the Bank of Canada maintained its overnight target rate, we did see declines in residential mortgage rates, which likely contributed to some of the improvements in housing demand in 2019. As we move into 2020, trade disputes and uncertainty are expected to result in slowing global economic growth centered around business investment and manufacturing. With slower growth also expected in Canada, risks to rising inflationary pressure have eased.

If the economy slows more than expected due to slower global growth, especially in the U.S., then inflation levels in the country would fall below target. As a result, we could see some monetary policy action in terms of rate reductions to support stronger growth.

Current forecasts range from flat to modest cuts in the overnight target rate, depending on the forecaster’s outlook for economic growth. If mortgage rates follow, this could provide some modest improvements to housing market demand, as easing prices and more favourable rates will enable some to reconsider the ownership market.