PropertyWire.ca

As many expected, there were no big surprises in this morning’s Bank of Canada announcement, where maintenance was the name of the game. There are also no changes anticipated for the remainder for 2010, and at least the early part of 2011.

The Bank of Canada announced yesterday that it will maintain its target for the overnight rate at 1%. The Bank Rate is correspondingly 1-1/4% and the deposit rate is 3/4%.

While the global economic recovery unfolding as was forecast, some economic risks have increased. As anticipated, private domestic demand in the United States is beginning to gain some momentum, while growth in emerging-market economies has begun to settle in to a steadier, but still healthy, rate. Globally, Europe is beginning to see a slight recovery, according to recent data. However, there is a larger risk that sovereign debt concerns in several countries could re-ignite renewed strains in global financial markets.

The Canadian recovery is proceeding at a moderate pace, although there are indications of a slight slowdown in economic activity in the second half of 2010, beyond what the BOC had anticipated in its October Monetary Policy Report. In Q3, household spending was stronger than the Bank had projected; business investment growth was healthy.

Data suggests, though, that net exports were weaker than projected and continued to place a strain of significance on growth. This re-enforces a previously-identified risk that a combination of disappointing productivity performance and persistent strength in the Canadian dollar could dampen the expected recovery of net exports.

Canadian Inflation is in line with what the Bank of Canada expects; there has been little change to the underlying pressures that affect prices.

So then, the Bank has decided to maintain the target for the overnight rate at 1%. There will still be considerable monetary stimulus in place, which will help achieve the 2% inflation target in an environment of significant excess supply in Canada.

As targets fell short of the BOC`s expectations, in terms of growth, at this point, any further reduction in monetary policy stimulus would need to be carefully considered. There are no more anticipated announcements in this regard until January 18, 2011.

In terms of what this means for Real Estate Professionals, it is still business as usual, with no significant changes at this point- which is a double edged sword of sorts, as this is an indication of a favourable borrowing environment, but does not paint a picture of a robust economy. There is still growth, but it is slowing down. The rate maintenance will hopefully give the economy legs boost it back to health.

There is some speculation that there may be rate hikes early in 2011, if the economic growth warrants it.

———————————————————————————————————————
Contact the Jeffrey Team for more information – 416-388-1960

Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they reproduce them here for people who
are interested in Toronto real estate. They do not work for any builders.
———————————————————————————————————————

Related posts:

1. Bank of Canada Announcement — Rates Remain Unchanged As expected- stability was the order of the day in...
2. Bank of Canada Announcement — Rates Remain Unchanged Despite all the buzz and speculation about interest rates, with...
3. Bank of Canada Stands Pat on Key Rate The Bank of Canada announced this morn­ing that it will...
4. Bank of Canada says growth may be greater than forecast In July, the central bank had projected the economy...
5. Bank of Canada is the first to increase rates since 2007 As expected The Bank of Canada has increased prime rate...