Bank of Canada, Interest Rates and Montreal Real Estate.

The Bank of Canada lowered interest rates to 2.25 per cent on Wednesday, but cautioned that monetary policy can't fix the structural economic damage caused by the U.S. trade war.

The central bank said it made the 25-basis-point cut as weakness ripples through the Canadian economy and with inflation expected to stay close to the bank's two per cent target.

"For many months, we have been stressing that monetary policy cannot undo the damage caused by tariffs," said Bank of Canada governor Tiff Macklem during a news conference in Ottawa.

The economy has been saddled with higher costs and less income as a result of the U.S. trade war. While the central bank's monetary policy can help the economy adjust to these circumstances, "it cannot restore the economy to its pre-tariff path," he said.

Macklem also suggested that if inflation stays in line with the bank's current expectations — hovering around the two per cent target — the central bank will hold rates at their current level.

However, if the outlook changes, "we are prepared to respond," he said.

The central bank also released its Monetary Policy Report alongside its interest rate announcement on Wednesday, warning that the trade conflict is "fundamentally reshaping" Canada's economy.

While the Bank of Canada is lowering interest rates to boost demand in the economy, it faces challenges in doing so, according to Claire Fan, a senior economist at RBC.

If rate cuts stimulate demand in the Canadian economy, there's a risk that demand outpaces capacity to produce goods — "thereby causing inflation," she explained.

In December 2023, the rate was 5% and real estate was on hold. It is now 2.25 % and buyers are buying, sellers are selling ,and investors are investing.

It is ok out there.

For Montreal real estate news , go to the Brokers who know

McGuigan Pepin of Royal LePage Heritage