Good morning, my name\u2019s Salmaan Farooqui, and I cover the housing and mortgage market for The Globe. Today, we\u2019ll take a closer look at the Bank of Canada\u2019s decision to hike rates yesterday. It\u2019s the first rate change in nearly a year, and it won\u2019t do any favours for Canada\u2019s stagnant housing market. But first:<\/p>\n
Up firstIn the news<\/p>\n
Taxes: Ontario will match Ottawa\u2019s proposed \u201cmega\u201d tax deduction for businesses<\/a>, a move expected to cost the province $8-billion over five years while encouraging new investment.<\/p>\n Banking: BMO and TD have joined RBC in blocking third-party AI agents from accessing their digital platforms<\/a> amid concerns over customer data security.<\/p>\n Airlines: Air Canada\u2019s proposed expansion of its partnership with United Airlines on 10 cross-border routes could lead to higher fares for travellers<\/a>, the Competition Bureau warns.<\/p>\n Open this photo in gallery:<\/a><\/p>\n Bank of Canada Governor Tiff Macklem during a news conference in Ottawa on Wednesday.Adrian Wyld\/The Canadian Press<\/p>\n In focusHigher rates, tougher housing market<\/p>\n A little less than a year ago, I spoke to economists to get a sense of what 2026 would look like for interest rates and the housing market. The answer was simple: It was going to be boring. And for the most part, it was.<\/p>\n Rates were kept at 2.25 per cent for much of the year, even during unexpected headwinds such as the oil-price shock from the Iran war and the collapse of Canada\u2019s trade talks with the United States. All the while, the housing market remained stagnant nationally.<\/p>\n The Bank of Canada\u2019s decision this week to raise rates to 2.5 per cent<\/a> marks an end to that boring era, at a time when homeowners looking for the cheapest rates may be more exposed to the bank\u2019s rate decisions.<\/p>\n Robert Kavcic, senior economist at BMO Capital Markets, says more consumers have been signing variable-rate mortgages in recent months because they\u2019re significantly cheaper than fixed rates. <\/p>\n As a result, this week\u2019s rate hike could immediately make a home purchase more expensive for buyers.<\/p>\n It\u2019s a change from the last couple years, when fixed rates were priced cheaper than variable rates. Fixed rates are based on bond yields rather than the central bank\u2019s policy, so there were other factors affecting the cheapest rates in the past.<\/p>\n Mr. Kavcic said further hikes could deepen the housing downturn<\/a> in specific weak segments, such as condo markets in the Vancouver and Toronto areas. In the rest of the country, it\u2019ll keep the market flat.<\/p>\n \u201cThis probably puts a lid on any type of rebound that may or may not have been building below the surface,\u201d he said.<\/p>\n Meanwhile, there is an unusually high level of disagreement over where rates will go next, or whether the bank should\u2019ve even increased rates<\/a> this week.<\/p>\n \u201cThe reason the market almost fully priced in this move is because last week the Bank of Canada effectively told us they were going to raise rates,\u201d Mr. Kavcic said.<\/p>\n Apart from that communication, he added, if you were to look at the data flow, the recent Consumer Price Index report and the business outlook survey, \u201cthere\u2019s nothing that really screamed the bank needed to raise rates right now.\u201d <\/p>\n Instead, the central bank hiked rates because it is worried that high oil prices will translate into inflation in other parts of the economy, Mr. Kavcic said, even though that hasn\u2019t necessarily happened yet. <\/p>\n He said that perhaps the bank is taking a more proactive approach after 2022, when it reacted too late to an overstimulated economy and high oil prices. <\/p>\n There are a wide range of guesses as to what might happen with rates from here. On one end of the spectrum, Royce Mendes, managing director and head of macro strategy at Desjardins, expects only one rate hike in 2027 and none for the rest of 2026. <\/p>\n Meanwhile, bond swaps markets, which capture investor expectations around interest rates, have priced in another three rate hikes in the coming year. <\/p>\n ChartedWeight loss boom<\/p>\n Canadian sales of GLP-1 drugs<\/a> have surged from $350.4-million in 2020 to $3.9-billion in 2025 and are on track to reach $4.8-billion this year. The booming market has created a major opportunity for Canadian drugmaker Apotex, which is launching a generic version of semaglutide, the active ingredient in Ozempic and Wegovy.<\/p>\n Quoted<\/p>\n I do not believe that what Minister Joly is doing \u2013 when she openly solicits buyers for a company the government does not own \u2013 is a good course of action.<\/p>\n \u2014 Cleveland-Cliffs chief executive Lourenco Goncalves<\/p>\n The U.S. company\u2019s CEO criticized Industry Minister M\u00e9lanie Joly<\/a> for suggesting there are potential buyers for Stelco, insisting the steelmaker is not for sale. The dispute comes amid layoffs at Stelco\u2019s Ontario plants and growing pressure from Ottawa over the company\u2019s employment commitments.<\/p>\n Up nextMore files we\u2019re following<\/p>\n Before the bell: In Canada, earnings are due from Restaurant Brands International, Teck Resources and Spin Master. On Wall Street, Amazon, Eli Lilly, Mastercard, Intel, Merck, Caterpillar, Shell and Starbucks are also scheduled to report.<\/p>\n By the numbers: U.S. third-quarter GDP figures and the Federal Reserve\u2019s preferred inflation gauge are due at 8:30 a.m. ET. Statistics Canada will also release August payroll employment figures, while the European Central Bank is set to announce its latest interest-rate decision at 8:15 a.m. ET.<\/p>\n Morning update<\/p>\n Global markets were mixed<\/a> as AI-related earnings announcements from Alphabet<\/a> and Microsoft<\/a> prompted wildly different responses, raising the stakes \u200bfor Amazon and Intel results due later in the day.<\/p>\n Wall Street futures diverged, with the tech-heavy Nasdaq pointing lower, while TSX futures were in positive territory.<\/p>\n Overseas, the pan-European STOXX 600 was up 0.59 per cent in morning trading. Britain\u2019s FTSE 100 rose 0.44 per cent, Germany\u2019s DAX advanced 1.13 per cent and France\u2019s CAC 40 gained 1.11 per cent. <\/p>\n In Asia, Japan\u2019s Nikkei closed 1.1 per cent higher, while Hong Kong\u2019s Hang Seng declined 0.59 per cent. <\/p>\n The Canadian dollar traded at 71.45 U.S. cents.<\/p>\n","protected":false},"excerpt":{"rendered":"Good morning, my name\u2019s Salmaan Farooqui, and I cover the housing and mortgage market for The Globe. Today,…\n","protected":false},"author":2,"featured_media":645030,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,78261,219,111,11958,6042,139,14485,69],"class_list":["post-645029","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-businessbrief","tag-economy","tag-new-zealand","tag-newnewsletter","tag-newsletter","tag-newzealand","tag-noastack","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/645029","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=645029"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/645029\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/645030"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=645029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=645029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=645029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}