Consumers overestimating how low, and how fast, interest rates will fall: economists

TORONTO — With interest rates likely at or near their peak in Canada, experts say consumers shouldn’t expect rates to return to pre-pandemic levels.

The Bank of Canada’s overnight rate was 1.75 per cent throughout 2019, before the central bank dropped it to a quarter of a point to support the economy during the onset of the COVID-19 pandemic. Borrowers have been increasingly opting for shorter terms on their mortgages, hoping rates will be lower in a year or two, she said.“If you look at our forecast, if you look at the consensus on the street ... Most people have some cuts coming in by the second half of next year. But that's presumed that the economy is weaker than it is today,” said Caranci.

“A higher neutral rate means that the current policy rate may not be as restrictive as the thinks,” they wrote. There are downsides to having very low rates, said Macdonald, including the fact that when recession hits, the central bank has very little room to stimulate the economy by lowering rates further.

He agrees that Canadians are now in a “difficult period of adjustment,” where household budgets are being eaten up by mortgage costs, rent is on the rise and house prices are expected to moderate. That adjustment has really just begun, he said.Bank of Canada hold means 'suffocating' mortgage payments to stick aroundYour TFSA can be taxed, but it likely won't be if you hold a small position in Royal Bank of Canada stock.

Loans Loans Latest News, Loans Loans Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Canada facing 'stagflation' risk: former Bank of Canada officialAs the Bank of Canada hints that interest rates may stay at five per cent for some time, a former deputy governor at the central bank says the country’s economy now risks 'stagflation.'
Source: BNNBloomberg - 🏆 83. / 50 Read more »

Consumers overestimating how low, and how fast, interest rates will fall: economistsTORONTO — With interest rates likely at or near their peak in Canada, experts say consumers shouldn’t expect rates to return to pre-pandemic levels.
Source: SooToday - 🏆 8. / 85 Read more »

US consumers keep spending briskly even in the face of persistent inflation and high interest ratesWASHINGTON (AP) — An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth .
Source: SooToday - 🏆 8. / 85 Read more »