Bank of Canada Interest Rate Announcement - March 27, 2020
For the second time this month, the Bank of Canada has lowered its overnight policy rate before its regularly scheduled announcement date, taking the overnight rate down a further 50 basis points to 0.25 per cent. That level is what the Bank considers its effective lower bound, meaning it can not reduce rates further without potentially disrupting key short-term funding markets.
The Bank also announced two new programs to ensure the continued smooth functioning of credit markets and to promote credit availability. The first, the Commercial Paper Purchase Program, is targeted at alleviating strains in the short-term funding market and the second entails the Bank purchasing Government of Canada bonds in the secondary market. The latter program is a type of what is generally called "quantitative easing" though the Bank's program is targeted at all maturities, rather than longer term yields as in traditional quantitative easing.
All of these actions represent a serious and significant amount of firepower aimed at keeping the Canadian financial system and credit markets functioning during this extraordinary time. If successful, we should see currently elevated risk spreads on mortgage products start to decline, reversing recent increases in Canadian mortgage rates.
For the second time this month, the Bank of Canada has lowered its overnight policy rate before its regularly scheduled announcement date, taking the overnight rate down a further 50 basis points to 0.25 per cent. That level is what the Bank considers its effective lower bound, meaning it can not reduce rates further without potentially disrupting key short-term funding markets.
The Bank also announced two new programs to ensure the continued smooth functioning of credit markets and to promote credit availability. The first, the Commercial Paper Purchase Program, is targeted at alleviating strains in the short-term funding market and the second entails the Bank purchasing Government of Canada bonds in the secondary market. The latter program is a type of what is generally called "quantitative easing" though the Bank's program is targeted at all maturities, rather than longer term yields as in traditional quantitative easing.
All of these actions represent a serious and significant amount of firepower aimed at keeping the Canadian financial system and credit markets functioning during this extraordinary time. If successful, we should see currently elevated risk spreads on mortgage products start to decline, reversing recent increases in Canadian mortgage rates.
Bank of Canada Interest Rate Announcement - March 13, 2020
Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is "having serious consequences for Canadian families, and for Canada's economy". In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.
We expect this rate cut to be followed by an additional reduction of the Bank's overnight rate at its April 2020 meeting.
Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is "having serious consequences for Canadian families, and for Canada's economy". In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.
We expect this rate cut to be followed by an additional reduction of the Bank's overnight rate at its April 2020 meeting.
Bank of Canada Interest Rate Announcement - March 4, 2020
The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent. This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak. In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.
Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.
Canadian bond yields have declined significantly with 5-year bond yields falling below 1% for the first time since 2017. Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower, though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.
The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent. This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak. In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.
Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.
Canadian bond yields have declined significantly with 5-year bond yields falling below 1% for the first time since 2017. Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower, though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.
Bank of Canada Interest Rate Announcement - October 30, 2019
The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that ongoing trade conflicts have weakened the global economic outlook, which is expected to drag Canadian economic growth below its potential in the second half of this year. The bank is further projecting that growth will register under 2 per cent over the next two years. Inflation is expected to trend at the Bank's target of 2 per cent.
With the expectation that the US Federal Reserve will be lowering its own policy rate later today, the third rate cut this year, there may be extra pressure for the Bank to begin loosening monetary policy at its next meeting. As reflected by the Bank's statement, while current trade conflicts will test the resilience of the Canadian economy, the Bank does not as yet foresee the need for lower interest rates. However, the Bank stands ready to act if the impact of trade conflicts spreads beyond trade and investment and begin to slow consumer spending or housing activity. Thus far, the Bank appears to judge those risks as contained, which likely mean no change in interest rates this year.
The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that ongoing trade conflicts have weakened the global economic outlook, which is expected to drag Canadian economic growth below its potential in the second half of this year. The bank is further projecting that growth will register under 2 per cent over the next two years. Inflation is expected to trend at the Bank's target of 2 per cent.
With the expectation that the US Federal Reserve will be lowering its own policy rate later today, the third rate cut this year, there may be extra pressure for the Bank to begin loosening monetary policy at its next meeting. As reflected by the Bank's statement, while current trade conflicts will test the resilience of the Canadian economy, the Bank does not as yet foresee the need for lower interest rates. However, the Bank stands ready to act if the impact of trade conflicts spreads beyond trade and investment and begin to slow consumer spending or housing activity. Thus far, the Bank appears to judge those risks as contained, which likely mean no change in interest rates this year.
Bank of Canada Interest Rate Announcement - May 29, 2019
The Bank of Canada left its target for the overnight rate unchanged at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that the slowdown over the past two quarters was temporary and growth should pick up beginning in the second quarter of 2019. On inflation, the Bank expects that both total CPI and core inflation will remain near its 2 per cent target in coming months. Overall, the Bank judges its current level of monetary accommodation as appropriate.
Slow growth in the first half of 2019, the result of reductions in Alberta oil production, global trade uncertainty and the continued impacts of the B20 stress test, has likely pushed out any possibility of further tightening by the Bank of Canada into next year at the earliest. In fact, if financial markets are to be believed, the Bank may have missed its chance to return its policy rate to its preferred or "neutral" level and the next move may even be a rate cut. Canadian mortgage rates have responded strongly to revised market expectations for Canadian monetary policy, with 5-year mortgage rates falling back to 2017 levels. Those lower rates are already providing a boost to sales in May and should continue to do so through the summer.
The Bank of Canada left its target for the overnight rate unchanged at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that the slowdown over the past two quarters was temporary and growth should pick up beginning in the second quarter of 2019. On inflation, the Bank expects that both total CPI and core inflation will remain near its 2 per cent target in coming months. Overall, the Bank judges its current level of monetary accommodation as appropriate.
Slow growth in the first half of 2019, the result of reductions in Alberta oil production, global trade uncertainty and the continued impacts of the B20 stress test, has likely pushed out any possibility of further tightening by the Bank of Canada into next year at the earliest. In fact, if financial markets are to be believed, the Bank may have missed its chance to return its policy rate to its preferred or "neutral" level and the next move may even be a rate cut. Canadian mortgage rates have responded strongly to revised market expectations for Canadian monetary policy, with 5-year mortgage rates falling back to 2017 levels. Those lower rates are already providing a boost to sales in May and should continue to do so through the summer.
Canadian Housing Starts - May 8, 2019
Canadian housing starts increased 23 per cent on a monthly basis in April to 235,460 units at a seasonally adjusted annual rate (SAAR). The trend in Canadian housing starts was up, averaging 206,000 units SAAR over the past six months.
In BC, total housing starts were down 51 per cent on a monthly basis to 49,200 units SAAR. Total starts were up 26 per cent compared to April of last year. On a monthly basis, starts of multiple units were up 63 per cent to 41,000 units SAAR while single detached starts rose 11 per cent to 8,150 units SAAR.
Looking at census metropolitan areas (CMA) in BC:
Canadian housing starts increased 23 per cent on a monthly basis in April to 235,460 units at a seasonally adjusted annual rate (SAAR). The trend in Canadian housing starts was up, averaging 206,000 units SAAR over the past six months.
In BC, total housing starts were down 51 per cent on a monthly basis to 49,200 units SAAR. Total starts were up 26 per cent compared to April of last year. On a monthly basis, starts of multiple units were up 63 per cent to 41,000 units SAAR while single detached starts rose 11 per cent to 8,150 units SAAR.
Looking at census metropolitan areas (CMA) in BC:
- Total starts in the Vancouver CMA were up 63 per cent on a monthly basis in April at 34,200 units SAAR as multiple unit starts jumped 75 per cent from March Compared to April 2018, total starts in Vancouver were up 46 per cent.
- In the Victoria CMA, housing starts more than doubled on a monthly basis to 5,305 units SAAR, mostly due to a spike in multiple unit starts. New home construction was up 66 per cent year-over-year.
- Total starts in the Kelowna CMA increased 30 per cent on a monthly basis, though were still relatively low at just 760 units SAAR. Year-over-year, total starts were down 82 per cent as inventory of unsold units accumulate, constraining further new construction projects. This is precisely the risk we outlined when the provincial speculation tax was introduced.
- Housing starts in the Abbotsford-Mission CMA were down 46 per cent in April at just under 1000 units SAAR. However, on a year-over-year basis, new home construction was up more than double due to strong multiple unit starts.
Source from BCREA