Speculation mounts over BoC’s latest interest rate announcement

by Jennifer Paterson03 Mar 2015
As the real estate industry waits with bated breath for the Bank of Canada’s interest rate announcement tomorrow, one expert makes his prediction.
“The Bank of Canada will likely pause on Wednesday before cutting rates again in April,” Sal Guatieri, senior economist at BMO Capital Markets, told REP sister site, CREW.
“It likely needs more time to assess the economic impact of lower oil prices and to see where oil prices will stabilize.”
The bank cut interest rates by 0.25 per cent at the end of January, surprising many in the industry who expected that interest rates would rise in 2015. Predictions since the interest rate cut have pointed to a further reduction on March 4.
But BMO’s Guatieri said he doesn’t expect a reduction until April.
“Expected weak GDP growth in Q1 (about one per cent) should spur another rate reduction in April,” he said. “The best case scenario for housing markets is for rates to stay low this year, which is a good bet even if the Fed begins liftoff in the fall.
“The worst case scenario would be if rates rise too quickly, say because of an upturn in inflation. But that risk is low this year.”
The announcement is due the week after consumer confidence across the country dropped for the sixth straight week since the BoC initially cut interest rates on January 21.
The reading for Nanos Research’s for the week ended February 27 declined to 53.6, the lowest since May 2013.
The share of Canadians who predict a drop in real estate prices climbed up to 21.4 per cent last week, the highest since the 2009 recession and double November levels.
The share of real estate optimists fell to 32.6 per cent from 33.4 per cent, in line with depressed levels so far in 2015.

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