Bank of Canada Reduces Policy Interest Rate Amid Escalating Trade Tensions

On March 12, 2025, the Bank of Canada (BoC) announced a 25 basis point reduction in its target for the overnight rate, bringing it down to 2.75%. This decision marks the seventh consecutive rate cut and comes in response to escalating trade tensions with the United States, notably the recent U.S. tariffs on Canadian steel and aluminum exports.

Rationale Behind the Rate Cut

The BoC's decision is primarily driven by concerns that the ongoing trade dispute could hinder Canada's economic growth, elevate inflation, and increase unemployment rates. The uncertainty stemming from these trade tensions has already led to a decline in consumer and business confidence, with sectors such as manufacturing and discretionary consumer spending adjusting their sales forecasts and pricing strategies accordingly.

Implications for Borrowing and the Economy

The reduction in the policy rate is intended to make borrowing more affordable for both consumers and businesses. Lower interest rates typically lead to reduced costs for mortgages, personal loans, and business financing, which can stimulate economic activity by encouraging spending and investment.

Bank of Canada's Cautious Stance

Despite the rate cut, the BoC remains cautious about future monetary policy adjustments. Governor Tiff Macklem emphasized that while the central bank is committed to supporting the economy, there are limitations to what monetary policy can achieve in counteracting the adverse effects of a trade war. The BoC will closely monitor economic indicators, including inflation trends and employment data, to assess the necessity of further rate adjustments.

Market Reactions

Following the BoC's announcement, the Canadian dollar experienced a modest appreciation against the U.S. dollar, reflecting a balanced policy statement that did not strongly signal additional immediate rate cuts. Additionally, the Canadian government has announced retaliatory tariffs on U.S. imports valued at approximately CAD 29.8 billion, further intensifying the trade dispute.

Looking Ahead

The BoC's next scheduled interest rate announcement is set for April 16, 2025. In the interim, the central bank will continue to evaluate the economic landscape, particularly the evolving trade relations with the United States, to determine appropriate monetary policy actions.

In February 2025, the Calgary real estate market displayed signs of stabilization, with inventory levels rising and price growth moderating across various property types.

Overall Market Trends

• Sales Activity: Calgary recorded 1,721 sales in February, marking a 19% decrease from the previous year. Despite this decline, sales remained above historical averages for the month.

• New Listings and Inventory: New listings reached 2,830 units, aligning with historical norms. This influx contributed to a substantial 76% year-over-year increase in inventory levels, totaling 4,145 units. The months of supply rose to 2.4, more than double the figure from the same period last year.

• Benchmark Prices: The unadjusted benchmark price for residential properties was $587,600, showing a modest 1% increase compared to February 2024.

Detached Homes

• Sales and Listings: Sales declined by nearly 20% year-over-year to 765 units, while new listings saw a 6% increase, totaling 1,265 units. This dynamic led to a 61% rise in inventory levels, reaching 1,698 units.

• Prices: The benchmark price for detached homes rose by approximately 5% from the previous year, reaching $760,500. Notably, the City Centre district experienced an 8% price increase.

Semi-Detached Homes

• Market Activity: New listings increased by 7% to 240 units, while sales decreased by nearly 14%, totaling 165 units. Inventory levels grew by 46% compared to the previous year.

• Pricing: The benchmark price for semi-detached homes was $683,500, reflecting a 7% year-over-year increase. The City Centre and South districts led this growth with approximately 8% increases.

Row/Townhouses

• Supply and Demand: Sales decreased by over 9% year-over-year, while new listings rose by almost 4%. Inventory levels more than doubled to 655 units, though they remain below historical averages for February.

• Price Trends: The benchmark price for row homes was $446,880, up nearly 3% from the previous year. The East district notably experienced a significant 12% price increase.

Apartment Condominiums

• Market Dynamics: Sales reached 473 units, a 26% decrease from the previous year but still above long-term averages for February. New listings remained stable year-over-year at 852 units, a record high for the month. Inventory levels increased by 90%, leading to a months of supply figure of 3.1.

• Pricing: The benchmark price for apartments was $334,200, approximately 4% higher than February 2024. The West district saw the largest price growth at over 8%.

Regional Market Highlights

• Airdrie: Sales declined by nearly 9% to 123 units, while new listings increased by 23% to 225 units. Inventory levels more than doubled to 345 homes, resulting in a months of supply figure of nearly three months. The benchmark price was $537,600, a 1.6% year-over-year increase.

• Cochrane: Both sales and new listings exceeded long-term averages, with 75 sales and 126 new listings. Inventory rose by over 48% year-over-year to 196 units, leading to a months of supply figure of 2.6. The benchmark price increased by over 5% to $577,100.

• Okotoks: Sales decreased by 4% to 45 units, while new listings grew by 7% to 60 units. Inventory levels remained low at 69 units, resulting in a months of supply figure of 1.5. The benchmark price was relatively stable compared to January, with a slight increase of under 1% year-over-year.

Chestermere

Chestermere's real estate market in February 2025 exhibited notable trends, reflecting both stability and growth across various property segments.

Inventory and Listings

The total number of active listings in Chestermere stood at 168, a decrease from 188 in December 2024 and 216 in November 2024. This decline indicates a tightening market, potentially leading to increased competition among buyers.

Average and Median Prices

• Average Price: The average home price in Chestermere was $1,012,286, reflecting a 2.28% decrease from December 2024's average of $1,035,371. Despite this monthly dip, the market has shown resilience over the past months.

• Median Price: The median home price experienced a slight increase of 0.70%, rising from $673,131 in December 2024 to $677,846 in January 2025. This uptick suggests sustained demand for mid-priced properties.

Price Trends by Property Size

• Multi-Million Dollar Homes: This segment, comprising 42 properties, had an average price of $1,713,341, with an average of 3.76 bedrooms and 3.28 bathrooms.

• Newly Built Homes: Among 113 newly constructed homes, the average price was $731,219, offering modern amenities and designs.

• Reduced Price Homes: There were 6 homes with reduced prices, averaging $784,597, potentially presenting opportunities for value-seeking buyers.

Benchmark Price

The benchmark price for detached homes in Chestermere reached $790,500, marking a significant 10.1% increase compared to the previous year. This substantial rise underscores the strong demand and limited supply in the detached housing market.

Overall, the Calgary real estate market in February 2025 showed signs of transitioning towards more balanced conditions. While sales activity has moderated, increased inventory levels provide buyers with more options, and price growth has stabilized across various property types.