Toronto home sales bounced 11% in August from the previous month
The Bank of Canada may need to drive interest rates above four per cent partly because the housing market is “showing a flicker of life,” according to the Bank of Montreal.
Chief Economist Douglas Porter’s tentative prediction came after Toronto home sales bounced 11 per cent in August from the previous month. While benchmark prices continue to drop, the jump in activity could be a sign the market slide is easing even amid rising interest rates and an uncertain economic outlook.
“The BoC would likely not be pleased to see the housing market stabilize and even revive anytime soon,” Porter said Friday in a report to investors. “Any sign that the most interest-sensitive sector of the economy is holding up surprisingly well will be a clear signal that more tightening than expected may yet be required.”
Governor Tiff Macklem and his officials have already raised the central bank’s benchmark overnight rate to 2.5 per cent from 0.25 per cent in March. Markets and economists expect a three-quarter-point hike to 3.25 per cent at its Sept. 7 policy decision, with another hike likely in October, according to the median estimate in a Bloomberg survey.