Everything You Need to Know on Monday: Former BoC Governor Predicts Interest Rates Around 3% by 2026

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,288.20, down 0.32%

● Former BoC governor predicts interest rates around 3% by 2026

● Home affordability to improve in Canada as rates fall and incomes rise, BMO says

● Stocks to watch: Surge Energy

Today, the Canadian dollar is trading at 72.74 cents US, a slight decrease from Monday.

S&P/TSX 60 Index Standard Futures are trading at 1,288.20, down 0.32% from previous close.

Following the Bank of Canada’s recent decision to cut interest rates, a former Bank of Canada governor predicts interest rates to settle around three per cent over the coming years.

Last week Canada’s central bank moved to lower its benchmark policy rate by 25 basis points to 4.75 per cent while signalling further cuts. The move came as Bank of Canada officials said they have a higher degree of confidence that inflation is trending toward the central bank’s two per cent target.

In an interview with BNN Bloomberg on Friday, David Dodge, a senior advisor at Bennett Jones and former Bank of Canada governor, said the move makes “good sense” and the timing of future cuts will depend on “the continued progress on inflation.”

“Nevertheless, we think we'll be by 2026 pretty close to (a) two per cent (inflation rate) and so we ought to be back to a Bank of Canada policy rate that is close to neutral. And the new neutral is higher than the old one,” Dodge said.

“And so what we're arguing is that rates will come back down, but probably only to about three per cent by 2026,” Dodge said

According to a report from the Bank of Canada released in April, Canada’s neutral rate is estimated to be between 2.25 and 3.25 per cent.

One of Canada’s biggest banks says housing affordability is poised to gradually get better — but not enough to bring it close to pre-pandemic levels.

A combination of falling interest rates, roughly flat home prices and rising incomes will make buying a home easier for more Canadians, Bank of Montreal economists Robert Kavcic and Sal Guatieri wrote in a report to investors. Even in this scenario, however, affordability will still be “strained” by 2027, they said.

Their forecast assumes a decline of 75 basis points in five-year mortgage rates to 4.25 per cent and flat home prices in 2024, followed by three years of 3 per cent annualized price growth and per-capita income growth of just under 3 per cent.

The report underscores the challenges faced by policymakers who are dealing with frustration, particularly among younger Canadians, over the cost of housing. “We do see progress, but it’s going to take a long time to unravel something that took years to develop,” Guatieri said in an interview.

The share buyback will begin on Wednesday and expire by June 18, 2025. Shares repurchased as part of the bid will be cancelled.

The company implemented an automatic repurchase plan with a broker to facilitate the share purchases at times when the company can't be active on the market due to regulatory restrictions or self-imposed blackout periods.

Surge's share price edged lower by 0.4% to $6.78 on Friday.