Bank of Canada hints that rate hikes are coming sooner rather than later

OTTAWA – The Bank of Canada signaled Tuesday that it will look for an opportunity to raise interest rates sooner rather than later to keep inflation in check as the Canadian economy continues to grow.

The central bank kept its overnight rate target at one per cent but noted that the U.S. economy has grown at a slower pace than expected and Europe faces a growing credit crisis — both potential drags on the domestic economy.

Despite those threats, the bank said it believes Canada’s economy remains on track to grow this year, which observers said likely means a rate hike as early as October .

CIBC World Markets chief economist Avery Shenfeld said the bank’s decision to drop the word “eventually” in reference to the timing of its next rate hike suggests it will move before the end of the year.

“The underlying message is that rate hikes will be coming sooner than eventually,” Shenfeld said.

“The surprise is really for those who thought that the Bank of Canada would be waiting until 2012 to begin hiking rates, because I think here the message is directed at those dovish observers and indicating that we will probably be moving sooner than that.”

The suggestion that rates in Canada will rise in the near term helped push the loonie up 0.87 of a cent to 105.16 cents U.S.

Canadian economic growth slowed in the second quarter, but the central bank said it expects to see an acceleration in the second half of the year.

Overall, the Bank of Canada expects the economy will expand by 2.8 per cent in 2011, compared with its call in April for 2.9 per cent growth. The outlook for 2012 and 2013 was unchanged at 2.6 per cent and 2.1 per cent respectively.

Shenfeld said the central bank will likely wait to see if its economic outlook is on track before moving to raise rates.

“The key is the Bank of Canada has to see evidence that its projection for a re-accelleration in economic growth is actually taking place,” said Shenfeld, who currently expects the central bank to hold rates in September and move in October.

BMO Capital Markets senior economist Michael Gregory said the case of a rate hike was building, noting that household spending in Canada remains solid.

“We are sticking to our call for October and December rate hikes this year,” Gregory wrote in a note to clients.

However TD Bank economist Sonya Gulati said she continued to expect the Bank of Canada to keep rates on hold until its first meeting in 2012.

“We think that they are going to time it more to when the (U.S.) Fed is going to start to increase it, which we think is going to be March of next year,” she said.

“In previous communications, the governor has indicated that the rate spreads between the two countries is something he’s keeping a close eye on and that there has to be a working gap between the two for the countries to go forward, given how high the Canadian dollar is.”

Gulati said TD expects the Bank of Canada will increase its overnight rate target in one-quarter percentage point intervals starting in January to two per cent before pausing to assess the situation and then increasing the key rate again to three per cent by the end of 2012.

A full update on the central bank’s outlook for the economy and inflation is expected when the Bank of Canada publishes its monetary policy report on Wednesday.

The central bank said in its statement Tuesday that the U.S. economy continues to be restrained by the consolidation of household balance sheets and slow growth in employment while fiscal austerity measures in Europe also restrain growth.

“Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets,” the central bank said in its statement.

The central bank also said its outlook assumes that European authorities will be able to contain the sovereign debt crisis, “although there are clear risks around this outcome.”

However as Europe and the United States continue to put up warning signs, the Canadian economy has appeared to be on track with three consecutive months of job growth and signs of inflation.

Statistics Canada said Tuesday that its composite leading index rose 0.2 per cent in June compared with a 0.8 per cent gain made in May.

The agency said a downturn in the auto sector due to disruptions following the earthquake and tsunami in Japan temporarily slowed assembly work in Canada, while the housing index increased 0.3 per cent as home starts in June hit a high for the year to date.

The Bank of Canada’s latest business outlook survey last week found corporate Canada in a generally upbeat mood and looking to hire with 57 per cent of the firms surveyed expected to hire new workers over the next year compared with just four per cent of firms that expected to have fewer employees over the next 12 months.

Statistics Canada also reported a net gain of 28,000 jobs for June, a stark contrast to a disappointing report of only 18,000 jobs added in the United States.

The bank’s overnight target rate affects the prime lending rate at Canada’s big banks and in turn the rates for variable rate mortgages and lines of credit.

The Bank of Canada’s next scheduled rate announcement is set for Sept. 7.

The Canadian Press http://www.therecord.com/news/business/article/565419--bank-of-canada-hints-that-rate-hikes-are-coming-sooner-rather-than-later

Early Rise in Mortgage Rates to Boost Calgary Home Sales!

Improved economic outlook and new jobs to have big impact in long-term.

Calgary Real Estate Market Statistics 

November 6th, 2009 – Calgary MLS® Sales Activity

Calgary Real Estate Market Trends (current year vs the previous year)

Multiple offers are back...

As Calgary's real estate market continues to see prices rebound!

Hello friends and followers, do I have some news for you!

 

First off, I'd like thank my clients that have given me the opportunity to help them buy and sell these past few months and I'm sure they are happy with the great deals they got on their homes. Thank you for allowing me to provide you my real estate expertise and the opportunity to serve you, your friends and families in the future.

 

Now, I also must note that the market has never been this busy leading up to Christmas and the New Year. Thanks to a combination of positive factors over the past few months, the Calgary real estate market has seen lots of activity in a time where the seasonal slow down occurs as people prepare for the holiday season. In fact, I've experienced 3 multiple offer situations in the past 2 weeks, which shows that the market is still hot for the homes out there. In fact, there are some signs reminiscent to the start of the Calgary boom (lower inventory + lots of buyers + multiple offers 2004/2005)

 

The listing inventory continues to decline, which is great news for sellers! The fewer listings for buyers means more potential buyers for the current homes on the market and possibly the chance of competitive offers if the sellers priced correctly (Find out more Seller Tips here). Buyers, not to worry! There are still great deals out there, but you have to be very quick to react because the best deals sell the fastest (most in less than 1 week on the market)!

 

Just last weekend I went to see a home that just came out on the market the same day. I wrote an offer that afternoon. I submitted the offer an hour an later and by that time there were already 4 offers on the same place, and 3 more expected to come in before negotiations would take place. We changed our offer to reflect the situation and put in our best offer which was still over list price evidently not enough as the home sold for $70,000 over list price!! WOW! I haven't see that much of a spread in a while.

 

The moral of the story is that there are many great deals to be had in today's Calgary Real Estate market and the best homes sell quick. But you need the guidance of an experienced Realtor to help you make an educated decision to maximize your real estate investment.

 

Furthermore, the economy is on the rebound and the outlook for Calgary homes looks good. Currently, we still have some great interest rates, consumer confidence continues to rise, and with lower inventory of homes for sale, I believe we'll continue to see a strong market this winter and an upward trend in the start of 2010 (To see the full CREB monthly stats, click here). 

 

As a buyer, to maximize your chances of getting the best value for your dollar, you need to be prepared to act quickly. As a seller, this improved market place has shown signs that the worst is over, and the prices have stabilized and even increased in many neighbourhoods across the city.

 

Email me today in order to take advantage of today's marketplace.

 

DO YOU WANT TO KNOW WHAT YOUR HOME IS WORTH? OR WHAT YOUR NEIGHBOUR'S HOME JUST SOLD FOR? CLICK HERE TO FIND OUT

 

Thanks for reading and talk to you soon!

 

PS. If you or someone you know is in the market to buy or sell, please feel free to call me. I offer cash for referrals that turn into a deal. It's a WIN - WIN for everybody!

 

Paul, Pane, Dojcinovic – Real Estate Associate, B.C. (Marketing), C.C.S

Your Calgary and Area (403) Real Estate Specialist!
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KELLER WILLIAMS REALTY SOUTH
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