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Bank of Canada increases overnight rate target to11/4per cent

As we always try to keep you up to date on the Economy and the factors that affect the real estate market, we want to make you aware that the Bank of Canada today increased its target for the overnight rate to11/4per cent. The Bank Rate is correspondingly 11/2per cent and the deposit rate is 1 per cent.
According to the annoucement from the Bank of Canada, recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity. However, uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) is clouding the economic outlook.The global economy continues to strengthen, with growth expected to average 3 1/2 per cent over the projection horizon. Growth in advanced economies is projected to be stronger than in the Bank’s October Monetary Policy Report(MPR). In particular, there are signs of increasing momentum in the US economy, which will be boosted further by recent tax changes. Global commodity prices are higher, although the benefits to Canada are being dilutedby wider spreads between benchmark world and Canadian oil prices. InCanada, real GDP growth is expected to slow to 2.2 per cent in 2018 and 1.6 per cent in 2019, following an estimated 3.0 per cent in 2017.
Growth is expected to remain above potentialthroughthe first quarter of 2018 and then slow to a rate close to potential forthe rest of the projection horizon. Consumption and residential investment have been stronger than anticipated, reflecting strongemployment growth. Business investment has been increasing at a solid pace, and investment intentions remain positive. Exports have been weaker than expected although,apart from cross-border shifts in automotive production, there have been positive signs in most other categories. Looking forward, consumption and residential investment are expected to contribute less to growth,given higher interest rates and new mortgage guidelines,while business investment and exports are expected tocontribute more.
The Bank’s outlook takes into account a small benefit to Canada’s economy from stronger US demand arising fromrecent tax changes. However, as uncertainty about the future of NAFTA is weighing increasingly on the outlook, the Bank has incorporated into its projection additional negative judgement on business investment and trade. The Bank continues tomonitorthe extent to which strong demand is boosting potential, creating room for more non-inflationary expansion.In this respect, capital investment, firm creation, labour force participation, and hours worked are all showing promising signs. Recent data show that labour market slack is being absorbed more quickly than anticipated.
So How does this affect home prices?
This is where we can help you. To get information of how this affects your SPECIFIC situation, we are happy to sit down and discuss it with you. Our team has decades of experience in the Edmonton real estate market and can provide you with the resources that you need to make an informed decision today. Give us a call and let's set a time to help you with the answers you need. 


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