Bank of Canada: Housing Prices Not Direct Target for Interest Rates

The Bank of Canada's Governor Carolyn Rogers recently stated that the central bank cannot directly target house prices with interest rates. Speaking in Victoria, British Columbia, she emphasized that housing demand can be cooled or heated but not bottlenecks like permitting or limited building.

Rogers likened the benchmark overnight rate to a 'blunt tool' and said housing should be an input to decisions, not the target itself. The bank's review of its monetary policy framework looked at affordability and found no simple fixes to the trade-offs that come with raising or cutting rates.

The bank is watching Canadian Real Estate Association data showing seasonally adjusted 37,738 home sales in August, persistently below the 10-year average since 2022. Prices are roughly 20% below their pandemic-era peak when the central bank slashed the benchmark overnight rate to 0.25%. The policy rate sits at 2.25%, with the next decision due on October 28.

Rogers urged progress on supply and emphasized that steady, predictable inflation is essential for affordability. She also suggested trimming red tape holding back investment, saying 'We absolutely need to be thinking about how to streamline regulation,' while noting 'regulations are there for a reason too.' The central bank will continue focusing on inflation, a housing market constrained by supply, and a rate path that could stay bumpy into next year.