BoC interest rate revealed!
The Central Bank raised its new target for the overnight rate to % Wednesday, citing a confident financial outlook and above-potential growth.
This despite softened inflation, which thebankCanadas economy has been robust, fuelled by household spending. As a result, a significant amount of economic slack has been absorbed. The very
The BoC estimates real GDP growth to moderate from 2.8% in 2017 to 2% in 2018 and 1.6% in 2019.
Governing Council judges that the current outlook warrants todays withdrawal of some of the monetary policy stimulus in the economy, the Bank said. Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the Banks inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities.
judges to be temporary.strong
of the first quarter is expected to moderate over the balance of the year, but remain above potential, it said. Growth is broadening across industries and regions and therefore becoming more sustainable. As the adjustment to lower oil prices is largely complete, both the goods and services sectors are expanding.
Household spending will likely remain solid in the months ahead, supported by rising employment and wages, but its pace is expected to slow over the projection horizon, the Bank continued. At the same time, exports should make an increasing contribution to GDP growth. Business investment should also add to growth, a view supported by the most recent Business Outlook Survey.
The Bank also cited strengthening global economy and a US economy that is solidly growing as factors for raising its rate.
Europe is also experiencing above-potential growth.
However, geopolitical uncertainty and softened world oil prices remain concerns.
If you have any questions about how this can impact your variable rate mortgage or line of credit, contact me!
CREA Updates Resale Housing Market Forecast
The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service (MLS) Systems of Canadian real estate Boards and Associations in 2018 and 2019. Housing market fundamentals remain strong in many parts of the country. Nonetheless, many housing markets continue to struggle in the face of policy headwinds.
The new mortgage stress test announced last October had been expected to cause homebuyers to rush purchases in advance of the new rules coming into effect in January and for the pull-forward of sales activity to result in fewer transactions in the first half of 2018.
Evidence suggests the policy response was stronger than expected, with seasonally adjusted national home sales last December having surged to the highest level ever recorded before dropping sharply in early 2018.
Actual (not seasonally adjusted) national sales figures for March, April and May are typically among the most active months in any given year. Combined sales fell to a nine-year low for the three-month period. The seasonally adjusted trend suggests sales momentum has not yet begun to rally.
Interest rates are widely expected to rise further this year and next. Home sales activity is nonetheless still expected to strengthen modestly in the second half of 2018 as housing market uncertainty diminishes.
Taking these factors into account, the national sales forecast has been revised downward and is now projected to decline by 11% to 459,900 units this year. The decrease almost entirely reflects weaker sales in B.C. and Ontario amid heightened housing market uncertainty, provincial policy measures, high home prices, ongoing supply shortages and this years new mortgage stress test.
Bank of Canada maintains overnight rate target at 1¼ per cent
The Bank of Canada today maintained its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1 per cent.
Global economic activity remains broadly on track with the Banks April Monetary Policy Report (MPR) forecast. Recent data point to some upside to the outlook for the US economy. At the same time, ongoing uncertainty about trade policies is dampening global business investment and stresses are developing in some emerging market economies. Global oil prices have been higher than assumed in April, in part reflecting geopolitical developments.
Inflation in Canada has been close to the 2 per cent target and will likely be a bit higher in the near term than forecast in April, largely because of recent increases in gasoline prices. Core measures of inflation remain near 2 per cent, consistent with an economy operating close to potential. As usual, the Bank will look through the transitory impact of fluctuations in gasoline prices.
In Canada, economic data since the April MPR have, on balance, supported the Banks outlook for growth around 2 per cent in the first half of 2018. Activity in the first quarter appears to have been a little stronger than projected. Exports of goods were more robust than forecast, and data on imports of machinery and equipment suggest continued recovery in investment. Housing resale activity has remained soft into the second quarter, as the housing market continues to adjust to new mortgage guidelines and higher borrowing rates. Going forward, solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018.