The Bank of Canada’s future interest-rate cuts will occur in consecutive periods, a CoStar analyst predicts.

Carl Gomez expects the central bank to keep making rate cuts during its September, October and November meetings and additional sessions in 2025.

“I expect, in each of those announcements, they will do another 25 basis points,” said Gomez in an interview.

CoStar predicts that the BoC’s overnight lending rate will fall to 3% by 2025. The outlook comes after the BoC implemented 25-bps cuts in July and June, reducing its prime rate to 4.5% from 5% following several holds and rapid hikes.

“So, [3%] is a materially lower level than where it currently is,” said Gomez. “That’s what economists call a neutral level for the economy.”

But it is still much higher than the commercial real estate industry is used to. Between the end of the global financial crisis and the COVID-19 pandemic, the BoC policy rate did not exceed 2%, he noted.

Like many other analysts, Gomez was not surprised that the BoC implemented a second-consecutive cut in July. The BoC was itching for another cut on the back of the June cut, he added.

BofC Governor Tiff Macklem has softened his stance on cuts considerably. But Gomez still sensed a new attitude from the bank.

“What was probably a little bit more interesting was that [the BoC’s] tone in this cut sounded a lot more dovish in the sense that they are leaning towards more of the economic risks than the worry about persistent inflation that they have cited before,” said Gomez.

“This pivot towards that actually makes them more inclined to continue cutting rates, in my opinion.”

He does not expect the latest cut to prompt investors to bring their capital off the sidelines en masse, given that interest rates are closely tied to long-term bond yields already priced into the market.

“But what it does do is give real estate investors some confidence, right now, that we’re at the end of the rate hiking cycle and at the beginning of the rate cutting cycle,” he said.

Pictured: Bank of Canada Governor Tiff Macklem