Canada's Housing Bubble

Apr 20, 2010 canadianmortgagetrends.com

The Bank of Canada has kept its key interest rate at 0.25%.

What’s more interesting is the Bank’s written statement. It says, “With recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus.”

In other words, the BoC is no longer pledging to refrain from rate hikes. That virtually cements a June 1 or July 20 rate increase say analysts.

“It is an absolute 100% certainty [the Bank of Canada] will raise by July,” TD economist Craig Alexander said on BNN today.

The 5-year government bond yield (which influences 5-year fixed mortgage rates) is flying 13 basis points higher as we speak. The 1-year bond is up 14 bps!

The BoC also said it “expects the economy to return to full capacity in the second quarter of 2011.” That’s one quarter sooner than its previous forecast.

The BoC’s next interest rate meeting is June 1.

More to follow…

See also: Apr 20, 2010 BoC Press Release

Bank of Canada signals rate rise