A week or so ago most people thought the Bank of Canada would keep rates unchanged for a while.
Things can change fast.
Many now feel the Bank of Canada may soon need to cut rates to keep our economy growing.
Why? Well, the BoC’s David Dodge says risks to the world economy are more serious today than one month ago. Dodge says he’ll need to take this “into account” at upcoming interest rate meetings.
In addition, our economy is increasingly being weighed down by a strong Canadian dollar. 1/3 of Canada’s GDP is based on exports to the U.S., and it’s got 16% more expensive for Americans to buy our products since Jan. 1, 2007.
J.P. Morgan economist Ted Carmichael says, “We now expect that the Bank of Canada will need to cut its policy rate by 25 basis points on each of its next four decision dates through April.” If he’s right, rates could drop 1% by next spring. A more consensus view is probably 1/4% to 1/2%.
Despite the worry, some still feel that consumer spending, demand for our raw materials, and a strong housing market might offset the global weakness threatening Canada’s economy. If so, rates will likely stay put.
Whatever the case, almost everyone can now agree that there is no longer any urgency to lock in mortgage rates.