January 17th, 2012
Ottawa -
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
The outlook for the global economy has deteriorated and uncertainty has increased since the Bank released its October Monetary Policy Report (MPR). The sovereign debt crisis in Europe has intensified, conditions in international financial markets have tightened and risk aversion has risen. The recession in Europe is now expected to be deeper and longer than the Bank had anticipated in October. The Bank continues to assume that European authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. In the United States, while the rebound in real GDP during the second half of 2011 was stronger than anticipated, the Bank expects the U.S. recovery will proceed at a more modest pace going forward, owing to ongoing household deleveraging, fiscal consolidation and the spillovers from Europe. Chinese growth is decelerating as expected towards a more sustainable pace. Commodity prices – with the exception of oil – are expected to be below the levels anticipated in the October MPR through 2013.
The Bank’s overall outlook for the Canadian economy is little changed from the October MPR. While the economy had more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment. Prolonged uncertainty about the global economic and financial environment is likely to dampen the rate of growth of business investment, albeit to a still-solid pace. Net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar. In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity. Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further.
The Bank estimates that the economy grew by 2.4 per cent in 2011 and projects that it will grow by 2.0 per cent in 2012 and 2.8 per cent in 2013. While the economy appears to be operating with less slack than previously assumed, given the more modest growth profile, the economy is only anticipated to return to full capacity by the third quarter of 2013, one quarter earlier than was expected in October.
The dynamics for inflation are similar to those anticipated in the October MPR, although the profile for inflation is marginally firmer. Both total and core inflation are expected to moderate in 2012 and subsequently rise, reaching 2 per cent by the third quarter of 2013 as excess supply is slowly absorbed, labour compensation grows modestly and inflation expectations remain well-anchored.
Several significant upside and downside risks are present in the inflation outlook for Canada. Overall, the Bank judges that these risks are roughly balanced over the projection horizon.
Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.
Information note:
A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 18 January 2012. The next scheduled date for announcing the overnight rate target is 8 March 2012.
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December 6th, 2011
Ottawa – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Uncertainty around the global economic outlook has increased in the weeks since the Bank released its October Monetary Policy Report (MPR). Conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened. Additional measures will be required to contain the European crisis. The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October, as a result of increased deleveraging and tighter financial conditions, as well as necessary fiscal austerity and structural reforms.
Recent economic data suggest that growth in the United States has been slightly more robust than anticipated, largely as a result of continued vigour in consumer spending and business investment. Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth. Growth in China and other emerging-market economies continues to be strong, although there are signs that it is moderating to a more sustainable pace in response to weaker external demand and the lagged effects of past policy tightening.
On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. Household expenditures have more momentum than had been expected and business investment remains solid. Going forward, the weaker external outlook is expected to dampen GDP growth in Canada through financial, confidence and trade channels. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar.
Although total CPI inflation has been slightly higher than projected, the Bank continues to expect the inflation rate to decline as a result of reduced pressures from food and energy prices and ongoing excess supply in the economy. Core inflation has also been slightly firmer than projected and is expected to ease as the output gap persists well into 2013.
Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.
The next scheduled date for announcing the overnight rate target is 17 January 2012.
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September 7th, 2011
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Given the continuing deterioration of the global economic outlook over the recent weeks together with the intensification of European sovereign debt crisis and the sharply increased financial market volatility, the Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent.
This announcement was widely expected in the market but the economic pundits had been signaling otherwise until about a month ago. That was before the reports of how deep the US recession was and, indeed, how slow the recovery from the recession will be. US consumers are burdened by heavy personal debt and the unemployment rate is extremely high. Canada’s economy does not operate in a vacuum and Canadian economic growth stalled in the second quarter. The Bank expects total CPI inflation to continue to moderate as temporary factors, such as significantly higher food and energy prices, unwind. Core inflation is expected to remain well-contained as labour compensation growth stays modest, productivity recovers, and inflation expectations remain well-anchored.
With all this world-wide economic uncertainty and instability in the stock markets you can expect tremendous volatility in the bond market (the market that prices the fixed mortgage rates).
The next scheduled date for announcing the overnight rate target is 25 October 2011.
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June 8th, 2011
I thought you would find the following Financial Post article of interest. There has been much talk of a double-dip in the US property market and the fear that should the Bank of Canada increase rates too quickly then Canada runs the risk of getting dumped back into a recession. So, the comments of Jim Flaherty are quite interesting. Read on….
MONTREAL – The risk that the economic slowdown in the United States will turn into another North American recession is not high, Canada’s finance minister said Tuesday as he cautioned that too many people nevertheless remain jobless in this country.
“I do not think the risk is great,” Jim Flaherty said in response to a reporter’s question at the International Economic Forum of the Americas taking place in Montreal. “There are risk indicators with respect to which we are concerned which we reviewed in the budget [Monday] and which I reviewed with the private sector economists with whom I met last week. The nature of the risks have not changed. We are concerned about debts and deficit in the United States and the need for a convincing longer term plan in the United States” to deal with those problems.
Ottawa is also concerned about some evidence of continuing slowness in the U.S. real estate market which puts a damper on consumer confidence in that country, Mr. Flaherty said. As well, it is worried about the sovereign debt situation among some eurozone countries, including Greece.
“These are all risk factors but they are known risk factors,” Mr. Flaherty said, adding that to address the risk in the latest budget, federal finance officials discounted private sector growth assumptions by $10-billion in nominal GDP each year, equalling a revenue markdown of $1.5-billion annually.
The U.S. economy grew at a 1.8% annual rate in the first quarter but job growth remains anemic, prompting U.S. Federal Reserve Chairman Ben Bernanke to say Tuesday that the central bank should maintain monetary stimulus to boost a “frustratingly slow” recovery. U.S. employers hired 54,000 more people in April, well below the 165,000 expected by economists.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Mr. Bernanke said in a speech in Altanta. The U.S. economy is growing above “stall speed,” Deutsche Bank AG foreign exchange analyst Alan Ruskin told Bloomberg in an interview Tuesday.
“A lot of people say that if the U.S. economy slows below 2% in year-over-year gross domestic product historically, we’ve slipped in to recession. The key is that we stay above that line, otherwise that is perceived as stall speed and other issues kick in.” The pace of economic recovery in the United States is crucial for Canada because America is Canada’s largest trading partner, buying 75% of all Canadian exports like oil, wood and cars. Any major slowdown would hurt Canadian businesses and force layoffs here.
Mr. Flaherty maintained that unemployment in Canada also remains too high, even as his government initiates targeted hiring investments. The country’s unemployment rate stood at 7.6% in April as the economy added 58,000 mostly part-time jobs. Employment has grown by 1.7% in the last year.
Asked if the Canadian government has picked a preferred candidate to lead the International Monetary Fund, Mr. Flaherty said not yet. Former IMF chief Dominique Strauss-Kahn resigned last month amid allegations he sexually assaulted a New York City hotel worker. Agustín Carstens, the head of the Mexican central bank, and Christine Lagarde, France’s finance minister, are vying for the job.
In a speech to conference delegates, Mr. Flaherty stressed the importance of sound fiscal management for an elected government, noting no one truly foresaw the credit crisis in the fall of 2008 and subsequent recession. He said “it’s unpredictable” when the next shock might come.
The finance minister on Monday delivered a budget that included a pledge to bring the federal government back into surplus position by 2014-2015. He said he will do that through a combination of $4-billion in annual spending cuts and closing tax loopholes to generate another $4.1-billion.
The cuts mark the most intense attempt to rein in public sector spending in more than a decade. The government is conducting an operational review of the federal service and some departments have begun laying off staff.
Opposition against the cuts is expected to grow in the months ahead.
Canadian Auto Workers union president Ken Lewenza said Monday the government’s spending will wipe out thousands of jobs and hurt service delivery. “With the economic rebound being so uncertain and anemic private sector investment growth, these billion-dollar cuts are the last thing Canada needs,” Mr. Lewenza said.
But compared to what a private company would do to trim spending, the government’s $4-billion plan is not very ambitious, Mr. Flaherty argued.
Mr. Flaherty’s savings target represents 5% of Ottawa’s $80-billion in annual discretionary spending. The government won’t book the savings until it achieves them and has not provided any details of which programs and departments will be affected.
Tags: Economic Updates
Posted in Economic Outlook, Market Updates | No Comments »
May 25th, 2011
It has been generally expected that the Bank of Canada would look at raising rates in July but a report in the Financial Post on May 24 by the RBC Economics team predict that the Bank of Canada will hold-off on raising rates till September.
You can read more on this article at here.
Should you have any mortgage questions, please feel free to contact me.
Kind regards
Jacqueline Baker, AMP
Mortgage Broker
www.mypowermortgage.com/jacqueline
C | 604.724.6982
F | 604.648.9309
Dominion Lending Centres Total Mortgage and Leasing
1575 Marine Drive West Vancouver BC V7V 1H9
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April 12th, 2011
 As was widely expected, the Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The global economy continues to show signs of recovery with growth evident in the USA and Europe (even with the presence of some challenging banking issues in some Eurpoean countries and some challenging sovereign debts issues). There is the emergence of broader global inflationary pressures arising from the robust demand from emerging-market economies for commodities.
The Bank of Canada projects that the Canadian economy will grow by 2.90% in 2011 and 2.60% in 2012. The BOC sees total CPI increasing to 3% in the 2nd quarter of 2011 but then retracing back to the 2% target by mid-2012. The persistent strength of the Canadian Dollar could lead to a larger decline in imports and thus lower inflation even further.
The next scheduled date for announcing the overnight rate target is May 31, 2011.
Should you have any mortgage questions, please feel free to contact me.
Kind regards
Jacqueline Baker, AMP
Mortgage Broker
www.mypowermortgage.com/jacqueline
C | 604.724.6982
F | 604.648.9309
Dominion Lending Centres Total Mortgage and Leasing
1575 Marine Drive West Vancouver BC V7V 1H9
Follow me on Twitter | LinkedIn
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April 5th, 2011
 Activity in the Greater Vancouver housing market continued to strengthen in March with both the number of homes sold and added to the region’s Multiple Listing Service® (MLS®) reaching near record levels.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales of detached, attached and apartment properties in Greater Vancouver reached 4,080 in March 2011. This represents a 31.7 per cent increase compared to the 3,097 sales recorded in February 2011, an increase of 30.1 per cent compared to the 3,137 sales in March 2010 and an 80.1 per cent increase from the 2,265 home sales in March 2009. The all-time sales record for March occurred in 2004 when 4,371 transactions were recorded.
“Our market has had a very strong start to the spring season,” Rosario Setticasi, REBGV president said. “With home sales above 4,000 and nearly 7,000 home listings added to the MLS® in March, it’s clear that home buyers and sellers view this as a good time to be active in their local housing market.”
New listings for detached, attached and apartment properties in Greater Vancouver totalled 6,797 in March 2011. This represents a 3 per cent decline compared to March 2010 when 7,004 properties were listed for sale on the MLS®, an all-time record for March. Compared to February 2011, last month’s new listings total registered a 19.4 per cent increase.
At, 13,110, the total number of residential property listings on the MLS® increased 9.9 per cent in March compared to last month and declined 3 per cent from this time last year.
“Conditions favour sellers at the moment, but we’re seeing differences in home-price trends and overall activity depending on the region and property type,” Setticasi said.
The MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 5.4 per cent to $615,810 in March 2011 from $584,435 in March 2010.
Sales of detached properties on the MLS® in March 2011 reached 1,795, an increase of 34.4 per cent from the 1,336 detached sales recorded in March 2010, and a 100.1 per cent increase from the 897 units sold in March 2009. The benchmark price for detached properties increased 8.3 per cent from March 2010 to $866,806.
Sales of apartment properties reached 1,622 in March 2011, a 29.6 per cent increase compared to the 1,252 sales in March 2010, and an increase of 66.2 per cent compared to the 976 sales in March 2009. The benchmark price of an apartment property increased 2.1 per cent from March 2010 to $403,885.
Attached property sales in March 2011 totalled 663, a 20.8 per cent increase compared to the 549 sales in March 2010, and a 69.1 per cent increase from the 392 attached properties sold in March 2009. The benchmark price of an attached unit increased 3.6 per cent between March 2010 and 2011 to $511,039.
Download the complete Stats package here:
March 2011 Real Estate Stats
For any mortgage-related questions, please feel to contact me.
Kind regards
Jacqueline Baker, AMP
Mortgage Broker
www.mypowermortgage.com/jacqueline
C | 604.724.6982
O | 604.544.2006
F | 604.648.9309
Dominion Lending Centres Total Mortgage and Leasing
1575 Marine Drive West Vancouver BC V7V 1H9
Follow me on Twitter | LinkedIn
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April 4th, 2011
Peter Morrison/The Associated Press
More than a year after Europe’s debt crisis erupted in Greece, the leaders of the 17 countries that use the euro are still struggling to snuff it out.
Ireland said this week it will pour another 24 billion euros ($34 billion US) into its crippled banking system, while Portugal appears ready to join Ireland and Greece in needing a bailout from the European Union and the International Monetary Fund.
Here are some questions and answers about the crisis that won’t quit.
What’s the problem in Europe?
• Too much government debt. So much that people wonder if governments can pay it all back. Some countries — Greece, Ireland, Italy for instance — owe more on government bonds than their entire economy produces in a year.
All that debt keeps coming due. The governments have to sell new bonds to pay off the old ones. The people that buy the bonds — banks, investors, insurance companies — are getting reluctant to lend, and if they do, they sometimes want more interest than the governments can afford.
Suddenly, some governments find they can’t pay off their old bonds. Then it’s a choice: default or get bailed out.
Greece and Ireland DID get huge bailout loans. Why doesn’t that fix it?
• Only for a while. A bailout loan is still a loan that has to be paid back. And to get the bailout loans, countries promise the European Union and the International Monetary Fund they’ll be sensible from now on and try to balance their budget.
In fact, to pay back all that interest, countries have to in effect run a budget surplus, which means spending less than comes in through taxes. That sort of belt-tightening, often referred to as austerity, is not easy for countries in recession.
And the fear in bond markets can spread from one country to another. Portugal is expected to be the next to need a bailout.
Won’t shaping up their budgets plus a bailout take care of it? After all it’s good sense for governments to balance their budgets.
• Not during a recession. It takes a lot of income out of the economy. Growth lags. People lose their jobs, businesses close and don’t pay taxes because they don’t have income. So the government has less money — and still has trouble paying debts.
One estimate is that it will take Ireland 20 years to pay down its debt pile to a reasonable level.
And investors in the bond market demand far too much interest to lend the government money. It’s not clear what countries like Ireland will do long term.
But isn’t cutting back what the bond market and the European Union WANTED governments to do?
• Yes. Markets wanted balanced budgets so governments could pay off their bonds. Now they’re afraid balanced budgets will mean governments can’t pay off their bonds.
That’s because cutting spending too sharply can hurt economic growth, in turn depriving governments of the tax income they need to pay off their bonds.
Sometimes you can’t win.
So what IS the answer?
• Governments could muddle through and hope their economies start growing. But a number of economists say that eventually, Greece and Ireland will have to simply declare that they cannot pay back all the money they owe.
It’s called default, or, more technically, restructuring. Creditors are handed a new bond that gives them less than 100 cents on the euro. They’re paid less, later, or with less interest.
Is THAT the end of it then?
• Maybe. But default or restructuring can be ugly. Russia did it in 1998, and bounced back in a couple of years. Argentina did it in 2002 and people are still chasing them in the U.S. courts.
Also, remember people aren’t going to loan you any more money for a couple of years, so you should balance your budget first. If you try to default while running a deficit, you could have to start closing schools, hospitals and police stations.
And default is one thing for a developing country, and another thing for a rich European country. It would make the euro look bad, and a lot of powerful people — the leaders of the 17 eurozone countries and the European Central Bank, for starters — have a big political stake in that not happening.
Should I be worried?
• If you live or do business in one of the countries that’s gone bust, definitely. If you hold shares in companies that depend on customers in Europe, you might notice it as well. A 1997-98 currency and debt crisis in Asia and Russia hurt stocks for a while. The debt crisis could undermine growth in Europe. That could mean less growth for the global economy.
If you have any mortgage related questions, please feel free to contact me.
Jacqueline Baker, AMP
Mortgage Broker
www.mypowermortgage.com/jacqueline
C | 604.724.6982
O | 604.544.2006
F | 604.648.9309
Dominion Lending Centres Total Mortgage and Leasing
1575 Marine Drive West Vancouver BC V7V 1H9
Follow me on Twitter | LinkedIn
Posted in Economic Outlook | No Comments »
March 1st, 2011
Today the Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent.
The global economic recovery is proceeding broadly in line with the Bank’s expectation, although risks remain elevated. U.S. activity is solidifying and remains supported by stimulative fiscal and monetary policies. The pace of the European economic recovery is buoyed down by the state of the balance sheets of the Banks and this is a significant source of uncertainty to the global outlook.
Conversely, the pace of economic recovery in Canada is proceeding slightly faster than expected with consumption growth remaining strong, signs that household spending is moving more in line with the growth in household incomes and with business investment continuing to expand rapidly. The BOC mentions that the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance will continue to challenge the export sector of the Canadian economy even though there is early evidence of a recovery in net exports.
The good news is that inflation in Canada has been consistent with the Bank’s expectations whilst global inflationary pressures are rising.
Against this backdrop, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada.
The next scheduled date for announcing the overnight rate target is 12 April 2011.
New Mortgage Rules Revisited
If you would still like to get a mortgage amortized over 35 years or be able to refinance up to 90% of the value of your home, your file must be approved by both the mortgage lender and insurer by March 17th, i.e. your purchase or refinance can complete after March 18th, but it must be approved in the lender’s system by no later than March 17th.
- Example 1: you receive an accepted offer on a property purchase on March 17th but your purchase only completes on Jul7 17th – you will still be able to qualify at the 35 year amortization (up to 120 days later).
- Example 2: you want to refinance 90% of the value of your home and your file is approved by the lender on March 17th, but the new mortgage will only fund on May 17th (up to 60 days later).
Posted in BoC Interest Rate Announcements, Market Updates | No Comments »
February 22nd, 2011
Canada’s annual inflation rate slipped to a relatively tame 2.3 percent in January, bucking a trend which has seen several major nations struggle to keep rising prices under control. The increase, which matched market expectations, compares with the 2.4 percent recorded in December. It also means the Bank of Canada will be under no immediate pressure to raise interest rates on March 1, 2011. This is good news for all you with variable rate mortgages.
Inflation is one of the most important barometers, amongst others, that the Bank of Canada watches when determining what to do with the overnight lending rate.
Stay tuned for next Tuesday’s Bank of Canada announcement.
Tags: BoC Announcements, Inflation
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