Residential Market Commentary - Interest rate outlook remains stable

The first noteworthy economic release of the New Year has turned out to be a rather ho-hum document.  The Statistics Canada jobs report for December shows weak growth and an increase in the unemployment rate.  The numbers are unlikely to trigger any interest rate move by the Bank of Canada. 

An encouraging 50,200 full-time positions were added in December, but those were offset by the loss of 42,000 part-time jobs.  That brings total job growth for the month to 8,200 positions.  The unemployment rate now sits at 6.8%, up from 6.5% in November, as more people joined the search for work. 

An important but less talked about factor – wage growth – has also slowed.  It saw a year-over-year increase of 3.4% in December, down from 3.6% in November. 

The lackluster report coupled with lingering inflation concerns has most market watchers predicting the central bank will, once again, hold its benchmark policy rate at 2.25% at its next setting at the end of the month. 

Following the rate hold announced in December, Bank of Canada Governor Tiff Macklem said the 2.25% rate is “at about the right level” to support a period of modest growth while keeping inflation near target.  

The Bank expects to see headline inflation remain close to its 2.0% target for the next two years, while “underlying” inflation is running at about 2.5%.