Vancouver’s Interest Rates On Hold

Hold

No surprises from the Bank of Canada this morning. The Bank left its overnight rate at 1 per cent, where it has been on hold since September 2010.

Headwinds

The statement released this morning in support of the interest rate decision noted that while global economic headwinds continue to restrain economic activity, the Canadian economy is growing roughly in line with its production potential. On inflation, the Bank sees core inflation returning to its 2 per cent target over the next 12 months.

Excess

The Bank once again made clear that a gradual withdrawal of monetary stimulus may be become appropriate as excess supply in the Canadian economy is absorbed, but that such withdrawals would need to be weighed against domestic and global economic developments. Given ongoing uncertainty in the Euro-zone and the unresolved “fiscal cliff” in the United States, that caveat means that the Bank will likely hold off on raising rates until early 2013. We expect monetary tightening to proceed very cautiously, with perhaps a 25 to 50 basis points increase over 2013, bringing the Bank’s overnight rate to between 1.25 and 1.5 per cent by the end of next year.

Objects May Be Closer Than They Appear

So says the rear view mirror.

With that reflection one asks if mortgage rates did climb at this point in time would the Vancouver real estate market settle into a state of rigor mortis?

Copyright British Columbia Real Estate Association. Reprinted with permission.