No one has a crystal ball to know what exactly will unfold for 2023. But the following are just some of the reasons we can all be hopeful for a return to more normal market conditions in the coming year.
Interest rates peaking: The Bank of Canada has explicitly said economic data in the coming months will determine if it continues to increase interest rates. While an additional rate hike can’t be ruled out, I believe we’re at least near the peak.
Could rate relief could be on its way in 2023? Some economists believe the Bank could start cutting rates before the end of the year, which would be a welcome relief for borrowers. By 2024, however, most economists agree that interest rates will be lower than they are today.
Inflation in 2023: Despite some “stickiness,” the Bank of Canada’s rate hikes have worked to slow inflation from its peak growth rate earlier in the year. If inflation continues heading in the right direction, it could solidify calls that the Bank of Canada is finished with rate hikes for this cycle.
The Canadian economy: While signs are clear that the economy is heading for a slowdown, the Bank of Canada remains hopeful it will be able to pull off a so-called soft-landing, in which job losses are limited and the country can avoid a major downturn. The Bank of Canada sees GDP growth slowing to under 1% in 2023 and rising again to about 2% in 2024.
We know there will continue to be challenges ahead as the full effects of last year’s rate hikes work their way through the system. But looking forward, I do expect calmer waters compared to the stormy conditions of 2022.
And of course, the start of a new year is always the perfect time for an annual review of your mortgage and your personal finances. If you need someone to review your budget and overall financial situation, please give me a call and I’ll be happy to help ensure you’re in the best financial shape possible heading into 2023.