This is a partial explanation from Canadian Real estate Association on interest rates…..
As was widely expected, the Bank of Canada held its benchmark overnight lending rate steady at 0.25 per cent at its setting on January 19th, 2010. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, remains at 0.5 per cent.
With the economic recovery under way, the Bank acknowledged that the outlook for global growth was somewhat stronger than it had predicted in October, but stressed that this was still very much dependent on exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems. The Bank did, however, remove its comment regarding significant fragilities in the global economy, which had featured prominently in the previous two announcements.
Economic growth in Canada turned positive in the third quarter, and is expected to have improved further in the fourth quarter, accompanied by an increase in total CPI inflation, and higher than expected core rate of inflation.
The Bank said it believes that the Canadian economy will have contracted 2.5 per cent 2009, though annual data is not yet finalized. The Bank had originally predicted a 2.4 per cent decline. The Bank also made some small changes to its forecast for this year and next. The Bank now sees economic growth of 2.9 per cent in 2010, down slightly from the 3.0 per cent projection in October.
For 2011, the forecast was upgraded to 3.5 per cent from 3.3 per cent last fall. The Bank said the private sector should become the sole driver of domestic demand in 2011, which is when government stimulus is set to expire.
The Bank named a number of factors supporting Canadas economic recovery policy support, increased confidence, improving financial conditions, global growth, and higher terms of trade. The Bank reiterated that the strong Canadian dollar and weak U.S. demand were the main drags on the Canadian economy. As a result, growth continues to be driven more by the domestic side and less by exports.
The Bank said that the profile for the recovery in Canada was still consistent with its October Monetary Policy Report, saying inflation would return to the 2 per cent target in the third quarter of 2011. Conditional on this outlook, the overnight rate can be expected to remain at its current level until the end of the second quarter of 2010.
Terri Brewer
Catherine E. Harvey Realties Ltd.
Baddeck, NS
902 295 2364 ph, 902 295 3019 fax
902 295 3472 home
