Key Takeaways
- Fed, Bank of Canada lower rates
- Bank of England holds steady
- Housing market could see boost
On this week’s edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, unpacked the latest rate decisions from major central banks. He also assessed the health of the U.S. housing market and potential opportunities in listed real estate.
Safety Cushion
Lin began by noting the U.S. Federal Reserve (Fed), Bank of Canada and Bank of England each held policy meetings this week. Starting with the Fed, he said the central bank’s 0.25% rate cut was the first of the year, ending a long stretch of unchanged monetary policy.
“This was primarily a risk management cut, rather than a cut made because of a weakening economy,” Lin stated, emphasizing that by many measures, the American economy remains robust. As evidence, he pointed to the recent drop in unemployment claims, strong retail sales numbers and healthy corporate profits.
Looking ahead, he expects the Fed to gradually lower rates over time until monetary policy is neutral—at a level that neither speeds up nor slows down the economy. Lin added that another cut is likely in December.
Clear Cut
To the north, the Bank of Canada (BoC) also dropped rates by 0.25%, but for a different reason. “The economic risks in Canada are more elevated than in the United States,” Lin explained, noting Canadian GDP (gross domestic product) fell by 1.6% last quarter. In addition, the country’s labor market remains under pressure, with the unemployment rate topping 7% in August.
Against this backdrop, the BoC lowered rates primarily to bolster Canada’s sagging economy, Lin said. Looking ahead, it’s possible bank officials could slash borrowing costs twice more this year, with rate reductions continuing into 2026, he remarked.
Meanwhile, across the Atlantic, the Bank of England (BoE) kept rates unchanged, citing stubborn inflation. “While UK consumer prices have fallen significantly the past few years, they’re not quite at the level the bank wants to see,” Lin explained. That said, he thinks the BoE will gradually lower rates over time, particularly since the “neutral” rate is likely around 3%.
Homefield Advantage
Pivoting back to the U.S., Lin said some measures of the country’s housing market—including homebuilder sentiment and existing home sales—remain subdued. Elevated interest rates are partly to blame, he said, noting 30-year mortgage rates are still above 6%. As the Fed continues to cut rates, financing a home could become easier over time, Lin said.
He closed by broadening his focus to the general real estate sector, which consists of everything from malls and hotels to self-storage facilities and retirement communities. “Overall, listed real estate is trading at more attractive valuations than many U.S. stocks today. This presents a potentially compelling way for investors to diversify their portfolios,” Lin concluded.