The Bank of Canada reduced its overnight lending rate by 25 basis points to 2.5% on Wednesday, marking the first reduction since March.<\/p>\n\n\n\n
The U.S. Federal Reserve also cuts its prime rate by 25 bps on Wednesday.<\/p>\n\n\n\n
The BoC\u2019s widely expected cut came after three straight holds as BoC Governor Tiff Macklem expressed confidence that core inflation is under sufficient control. The cut was highly sought after by commercial real estate executives, who believe that it will help spur investment going forward.<\/p>\n\n\n\n
\u201cConsiderable uncertainty remains,\u201d said Macklem during a news conference in Ottawa. \u201cBut with a weaker economy and less upside risk to inflation, governing council judged that a reduction in the policy rate was appropriate to better balance the risks going forward.\u201d<\/p>\n\n\n\n
The reduction resulted even though Canada\u2019s economy is being affected by both U.S. tariffs and the unpredictability of American trade policy. Macklem said tariffs are having a \u201cprofound effect\u201d on the auto, steel and aluminum industries, among other sectors. And, Chinese tariffs on canola, pork and seafood, new U.S. levels on copper, and higher American tariffs on Canadian softwood lumber will spread the direct impacts further.<\/p>\n\n\n\n
But Macklem said recent data suggest that upward pressure on underlying pressures have diminished.<\/p>\n\n\n\n
\u201cThe federal government\u2019s recent decision to remove most retaliatory tariffs on imported goods from the United States will mean less upward pressure on the prices of these goods going forward,\u201d he said.<\/p>\n\n\n\n
The BofC is also wary of higher unemployment, which now stands at 7.1% and economic uncertainty. Many businesses have told the BoC that they have put investment plans on hold due to elevated uncertainty about U.S. trade policy. Businesses are also concerned that demand in Canada will weaken as the economic fallout broadens.<\/p>\n\n\n\n
Mark Fieder, head of Avison Young\u2019s Canadian business, said the cut is \u201cmost welcome\u201d for the company\u2019s clients and the entire CRE industry.<\/p>\n\n\n\n
\u201cGiven the economic unpredictability we\u2019ve all been weathering over recent months, this will provide relief and forward momentum for those investors who\u2019ve been hesitant about kick-starting deals,\u201d said Fieder.<\/p>\n\n\n\n
He expects investment to increase, particularly in underperforming asset classes like office. Well-performing sectors, including multi-family and industrial, will continue to achieve growth, he predicted.<\/p>\n\n\n\n
\u201cWe will keep a close eye there, as well as on retail, particularly in the hottest area of grocery-anchored [retail],\u201d said Fieder.<\/p>\n\n\n\n
Meanwhile, Avison Young Chair and CEO Mark Rose said the Fed\u2019s cut delivers a critical confidence boost to the industry, signalling a positive shift in U.S. market sentiment and supporting its ongoing recovery cycle.<\/p>\n\n\n\n
\u201cWhile a 25-basis-point reduction may not materially transform the landscape overnight, it meaningfully improves investor psychology, underwriting conditions, and the cost of capital \u2013 key ingredients for renewed momentum,\u201d said Rose. \u201cThese cuts are part of a broader set of building blocks necessary to restore liquidity, enhance debt availability, and stimulate investment activity across asset classes.\u201d<\/p>\n\n\n\n
Rose expects office assets, particularly class A and B properties that have experienced significant value adjustments, to see the biggest activity increase.<\/p>\n\n\n\n
\u201cLower interest rates improve the economics of both development and acquisition, unlocking pathways to capital and encouraging occupiers and investors alike,\u201d he said. \u201cAs expectations build for additional cuts totalling up to a full percentage point, the industry is poised to accelerate its recovery from trough to peak.\u201d<\/p>\n\n\n\n
Rose warned that the Fed\u2019s rate reduction is \u201cnot a magic fix.\u201d But, he added, it is a \u201cvital step forward\u201d that reinforces fundamentals, strengthens financial viability, and restores restores the confidence necessary for more deals to occur.<\/p>\n\n\n\n
The Fed cut its benchmark federal funds target rate to 4% to 4.5% in a widely anticipated move.<\/p>\n\n\n\n
Pictured: Bank of Canada Governor Mark Carney<\/em><\/p>\n\n\n\n Photo: Shutterstock<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" The Bank of Canada reduced its overnight lending rate by 25 basis points to 2.5% on Wednesday, marking…<\/p>\n","protected":false},"author":1,"featured_media":223,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,4],"tags":[15,11],"class_list":["post-219","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mortgage-news","category-news","tag-interest-rates","tag-real-estate-advice","content-wrap"],"_links":{"self":[{"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/posts\/219","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/comments?post=219"}],"version-history":[{"count":1,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/posts\/219\/revisions"}],"predecessor-version":[{"id":221,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/posts\/219\/revisions\/221"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/media\/223"}],"wp:attachment":[{"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/media?parent=219"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/categories?post=219"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sanjin.synology.me\/wordpress\/wp-json\/wp\/v2\/tags?post=219"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}