We have continued to see a retraction in the 5 year bond which is now 15 bps (basis points) lower than a week ago. Bank spreads (profit margin) over bond have increased to 2% yet there has been little to no movement in the 5 year rate.
Why is that ?
With the number of mortgage deals closing today and tomorrow, it is unlikely that rates will change before Thursday - if at all. If a bank changed their rate downwards today, they would open themselves up to having to reduce rates on all deals closing today and tomorrow which would effect service levels (this is the busiest time of the year for mortgage closings) by requiring a flood of emails & phone calls requesting changes to documentation and also effect profits (lower rates on all those deals means less income for the lender).
Remember that the banks will be closed Wednesday for the Canada Day
Holiday.
Showing posts with label interest rates. Show all posts
Showing posts with label interest rates. Show all posts
Monday, June 29, 2009
Tuesday, April 21, 2009
Bank of Canada Rate Drop Announcement
Bank of Canada cuts target rate by 25 bps to 0.25%; provides "conditional
commitment" to hold policy rate at 0.25% until end of 2010
The Bank of Canada cut the target for the overnight rate by 25 basis points to 0.25% citing a deeper-than-expected recession in Canada and the fact that "measures to stabilize the global financial system have taken longer than expected to enact". Markets were evenly split on whether the Bank would cut by 25bps or leave the target for the overnight rate at 50bps. In a twist to its usual policy, the Bank indicated that it did not lower the deposit rate paid on deposits by financial institutions at the BOC. Under normal circumstances, the deposit rate would also be cut by 25 basis points however to avoid distortions in short-term money markets, the Bank left the deposit rate unchanged. The Bank rate was cut to 0.50%.
The Bank also committed to keeping this rate structure until the end of the second quarter of 2010 in an effort to ensure that the inflation rate gravitates back to the 2% target over the medium term. While no mention of quantitative or credit easing was made in today's statement, the Bank stated that it "retains considerable flexibility in the conduct of monetary policy at low interest rates" and a framework will be outlined in Thursday's Monetary Policy Report.
The statement provided the broad strokes of the Bank's economic forecast update with details to follow in Thursday's Monetary Policy Report. On the back of recent reports, the Bank downgraded its forecast and now looks for the economy to continue to contract in the third quarter of the year. The 2009 forecast for real GDP growth was revised down to show a 3.0% decline compared to January's forecast of a 1.2% slip. The longer and deeper recession in 2009 will also put strains on the economy in 2010 and the Bank lowered its growth forecast to 2.5% from 3.8%. The Bank provided a forecast for 2011 real GDP of 4.7%. Against the weaker growth backdrop, the Bank now looks for the inflation rate to return to its target in the third quarter of 2011 rather than the second quarter and said that risks to the
projection are "tilted slightly to the downside."
Today's announcement was different in many ways relative to past statements and importantly provided a "conditional commitment" to holding both the target and deposit rate at one-quarter of a percent for a specific time frame (until the end of the second quarter of 2010). While the Bank did not produce or commit to using any other tools to implement additional easing in monetary policy, the details of their program on be released on Thursday will provide the means by which next steps can be taken if the economy disappoints the Bank's already-weak economic assumptions. The Bank also provided the detailed framework which it will use to conduct policy during this new regime. By providing removing some of the uncertainty about the direction of interest rates over the next year, the Bank is working hard to boost the confidence of Canadian households and businesses with the goal of putting the economy on a firmer growth path.
commitment" to hold policy rate at 0.25% until end of 2010
The Bank of Canada cut the target for the overnight rate by 25 basis points to 0.25% citing a deeper-than-expected recession in Canada and the fact that "measures to stabilize the global financial system have taken longer than expected to enact". Markets were evenly split on whether the Bank would cut by 25bps or leave the target for the overnight rate at 50bps. In a twist to its usual policy, the Bank indicated that it did not lower the deposit rate paid on deposits by financial institutions at the BOC. Under normal circumstances, the deposit rate would also be cut by 25 basis points however to avoid distortions in short-term money markets, the Bank left the deposit rate unchanged. The Bank rate was cut to 0.50%.
The Bank also committed to keeping this rate structure until the end of the second quarter of 2010 in an effort to ensure that the inflation rate gravitates back to the 2% target over the medium term. While no mention of quantitative or credit easing was made in today's statement, the Bank stated that it "retains considerable flexibility in the conduct of monetary policy at low interest rates" and a framework will be outlined in Thursday's Monetary Policy Report.
The statement provided the broad strokes of the Bank's economic forecast update with details to follow in Thursday's Monetary Policy Report. On the back of recent reports, the Bank downgraded its forecast and now looks for the economy to continue to contract in the third quarter of the year. The 2009 forecast for real GDP growth was revised down to show a 3.0% decline compared to January's forecast of a 1.2% slip. The longer and deeper recession in 2009 will also put strains on the economy in 2010 and the Bank lowered its growth forecast to 2.5% from 3.8%. The Bank provided a forecast for 2011 real GDP of 4.7%. Against the weaker growth backdrop, the Bank now looks for the inflation rate to return to its target in the third quarter of 2011 rather than the second quarter and said that risks to the
projection are "tilted slightly to the downside."
Today's announcement was different in many ways relative to past statements and importantly provided a "conditional commitment" to holding both the target and deposit rate at one-quarter of a percent for a specific time frame (until the end of the second quarter of 2010). While the Bank did not produce or commit to using any other tools to implement additional easing in monetary policy, the details of their program on be released on Thursday will provide the means by which next steps can be taken if the economy disappoints the Bank's already-weak economic assumptions. The Bank also provided the detailed framework which it will use to conduct policy during this new regime. By providing removing some of the uncertainty about the direction of interest rates over the next year, the Bank is working hard to boost the confidence of Canadian households and businesses with the goal of putting the economy on a firmer growth path.
Monday, March 2, 2009
Is the Bank of Canada running out of bullets ?
People are noticing that interest rates are at 65 year lows ... contact a mortgage professional to compare your existing mortgage with a new deal at today's fantastic rates. It costs nothing for the call and you may find out you'll save in the long run and lock in today's rates for another few years to come. Here's an article which should provide more good news for those in variable rate mortgages.
JULIAN BELTRAME Globe and Mail Report on Business The Canadian Press
OTTAWA - Just about now, Bank of Canada governor Mark Carney should be experiencing that sinking, helpless feeling about the economy.
It's not for want of trying to shock the economy back to life.
On Tuesday, the telegenic former Goldman Sachs executive is widely expected to cut short-term interest rates another half-point to bring the central bank's overnight rate to a barely-noticeable 0.5 per cent. For all practical purposes, zero.
That would make it the seventh time Mr. Carney has eased a notch, sometimes several notches, on interest rates since taking charge of the central bank last February. In that time he has also injected $40-billion in cash into the economy through asset swaps with banks, and last week took the unusual step of agreeing to accept corporate bonds as collateral to try and free up credit.
None of it has worked and the economy continues to decline.
One problem Mr. Carney faces is that in the current global credit crunch, financial market interest rates are volatile so there's no assurance Canadian banks will pass along the full Bank of Canada rate cuts by reducing their prime lending rate by the same amount.
The prime is the base used by banks to set rates on consumer and corporate loans, lines of credit and some mortgages. While the prime has dropped in most cases by the same amount as the Bank of Canada rate in the last year or so, other interest rates in the market have been rising and loans have been harder to get as the banks avoid riskier lending during a recession.
A recent survey shows a majority of manufacturers say access to credit is still the major obstacle they face.
"There is clear evidence that very low interest rates are not working to expand economic activity," former Conservative cabinet minister Doug Peters, once also a TD Bank chief economist, wrote in a paper for the Canadian Centre for Policy Alternatives.
"In the current recessionary environment, banks are obviously worried about lending to each other, and of course, are worried about lending to consumers and firms. Interest rates that count, such as inter-bank lending rates, mortgage lending rates, bank commercial lending rates, are all unusually high, especially considering that inflation is also very close to zero."
Even before Mr. Carney's Tuesday move, a new report Monday from Statistics Canada is expected to reveal that the Canadian economy, in Finance Minister Jim Flaherty's blunt words, "fell off the table" in the fourth quarter of 2008.
Private sector economists are predicting a sharp three-to-four per cent contraction in economic activity - severe recessionary territory - but remarkably it could be worse. In fact, Mr. Carney is predicting worse for the first three months of this year with a 4.8-per-cent economic contraction.
In his last public speech in January, Mr. Carney insisted that monetary action taken so far "will work," noting the lengthy lag time between action and impact, often cited as 12 to 18 months.
Since the bank started cutting 15 months ago, Canada should be just beginning to feel the effects.
Of course, Mr. Carney has invested a lot of credibility in the assertion it will work. He has stuck out his neck by predicting the economy will bounce back like an Indian rubber ball to 3.8 per cent growth next year, a forecast that has a few supporters and many detractors.
Although he doesn't believe the rebound will be as dramatic, Bank of Montreal economist Douglas Porter says there are good reasons to buy into Mr. Carney's rosy assessment, which would make the current slump milder than the recessions of the early 1980s and 1990s.
First, interest rates are much lower now than during the previous downturns. Second, aggressive stimulus policy is kicking in. And lastly, corporate balance sheets were in better shape heading into the current recession as compared to the previous two.
These act as shock absorbers for the economy's hard landing. However, they will be of little use if the world financial system is not fixed.
That's because until global banks have the confidence and wherewithal to start lending again, the U.S. and global economies will continue to struggle. And that will keep prices for commodities that Canada exports low, sap demand for Canadian manufactured goods, and in turn stifle Canadian job creation and incomes.
And that's where Mr. Carney's frustration comes in. He is largely a spectator in a game played outside his borders, able to influence the outcome only at the margins.
Mr. Carney has received some heat for some of his decisions, most notably keeping interest rates unchanged for a full five months from May to October last year in the mistaken belief that financial markets were stabilizing. But given that he's made up for lost time since then, most economists conceded the period of inaction wasn't critical.
"There are some quibbles I might have over what the Bank of Canada or Ottawa have done, but those are just specks of sand on the beach compared to what's hit us from outside this country," says Mr. Porter.
"There are things policy makers here can do to cushion the blow, but the tools at their disposal are only so big and they can only do so much to offset this deep global downturn."
In his January speech, Mr. Carney talked about other measures at his disposal besides rate cuts, no doubt foreshadowing last week's action on corporate bonds. The bank could also follow the Fed example by implementing so-called "quantitative easing" facilities to pump funds into the private sector, or follow Japan's lead by directly buying corporate bonds, or still more exotic intrusions in the money markets.
But Mr. Holt cautions non-traditional initiatives, even if Mr. Carney judged taking on the added risk necessary, would likely not be game-changing in isolation.
The next big round of central bank action should be left to the Fed and perhaps the Bank of England, he said. This could involve printing mounds of money to buy up government treasury bills in order to free up more cash for the private sector economy.
"You can cut rates to near zero, you can stimulate the domestic economy through fiscal policy, but you still need a rebound in the U.S. and European economies," he explains.
"The smart position (for Carney) is to cut rates Tuesday and wait and see what global central banks do elsewhere."
JULIAN BELTRAME Globe and Mail Report on Business The Canadian Press
OTTAWA - Just about now, Bank of Canada governor Mark Carney should be experiencing that sinking, helpless feeling about the economy.
It's not for want of trying to shock the economy back to life.
On Tuesday, the telegenic former Goldman Sachs executive is widely expected to cut short-term interest rates another half-point to bring the central bank's overnight rate to a barely-noticeable 0.5 per cent. For all practical purposes, zero.
That would make it the seventh time Mr. Carney has eased a notch, sometimes several notches, on interest rates since taking charge of the central bank last February. In that time he has also injected $40-billion in cash into the economy through asset swaps with banks, and last week took the unusual step of agreeing to accept corporate bonds as collateral to try and free up credit.
None of it has worked and the economy continues to decline.
One problem Mr. Carney faces is that in the current global credit crunch, financial market interest rates are volatile so there's no assurance Canadian banks will pass along the full Bank of Canada rate cuts by reducing their prime lending rate by the same amount.
The prime is the base used by banks to set rates on consumer and corporate loans, lines of credit and some mortgages. While the prime has dropped in most cases by the same amount as the Bank of Canada rate in the last year or so, other interest rates in the market have been rising and loans have been harder to get as the banks avoid riskier lending during a recession.
A recent survey shows a majority of manufacturers say access to credit is still the major obstacle they face.
"There is clear evidence that very low interest rates are not working to expand economic activity," former Conservative cabinet minister Doug Peters, once also a TD Bank chief economist, wrote in a paper for the Canadian Centre for Policy Alternatives.
"In the current recessionary environment, banks are obviously worried about lending to each other, and of course, are worried about lending to consumers and firms. Interest rates that count, such as inter-bank lending rates, mortgage lending rates, bank commercial lending rates, are all unusually high, especially considering that inflation is also very close to zero."
Even before Mr. Carney's Tuesday move, a new report Monday from Statistics Canada is expected to reveal that the Canadian economy, in Finance Minister Jim Flaherty's blunt words, "fell off the table" in the fourth quarter of 2008.
Private sector economists are predicting a sharp three-to-four per cent contraction in economic activity - severe recessionary territory - but remarkably it could be worse. In fact, Mr. Carney is predicting worse for the first three months of this year with a 4.8-per-cent economic contraction.
In his last public speech in January, Mr. Carney insisted that monetary action taken so far "will work," noting the lengthy lag time between action and impact, often cited as 12 to 18 months.
Since the bank started cutting 15 months ago, Canada should be just beginning to feel the effects.
Of course, Mr. Carney has invested a lot of credibility in the assertion it will work. He has stuck out his neck by predicting the economy will bounce back like an Indian rubber ball to 3.8 per cent growth next year, a forecast that has a few supporters and many detractors.
Although he doesn't believe the rebound will be as dramatic, Bank of Montreal economist Douglas Porter says there are good reasons to buy into Mr. Carney's rosy assessment, which would make the current slump milder than the recessions of the early 1980s and 1990s.
First, interest rates are much lower now than during the previous downturns. Second, aggressive stimulus policy is kicking in. And lastly, corporate balance sheets were in better shape heading into the current recession as compared to the previous two.
These act as shock absorbers for the economy's hard landing. However, they will be of little use if the world financial system is not fixed.
That's because until global banks have the confidence and wherewithal to start lending again, the U.S. and global economies will continue to struggle. And that will keep prices for commodities that Canada exports low, sap demand for Canadian manufactured goods, and in turn stifle Canadian job creation and incomes.
And that's where Mr. Carney's frustration comes in. He is largely a spectator in a game played outside his borders, able to influence the outcome only at the margins.
Mr. Carney has received some heat for some of his decisions, most notably keeping interest rates unchanged for a full five months from May to October last year in the mistaken belief that financial markets were stabilizing. But given that he's made up for lost time since then, most economists conceded the period of inaction wasn't critical.
"There are some quibbles I might have over what the Bank of Canada or Ottawa have done, but those are just specks of sand on the beach compared to what's hit us from outside this country," says Mr. Porter.
"There are things policy makers here can do to cushion the blow, but the tools at their disposal are only so big and they can only do so much to offset this deep global downturn."
In his January speech, Mr. Carney talked about other measures at his disposal besides rate cuts, no doubt foreshadowing last week's action on corporate bonds. The bank could also follow the Fed example by implementing so-called "quantitative easing" facilities to pump funds into the private sector, or follow Japan's lead by directly buying corporate bonds, or still more exotic intrusions in the money markets.
But Mr. Holt cautions non-traditional initiatives, even if Mr. Carney judged taking on the added risk necessary, would likely not be game-changing in isolation.
The next big round of central bank action should be left to the Fed and perhaps the Bank of England, he said. This could involve printing mounds of money to buy up government treasury bills in order to free up more cash for the private sector economy.
"You can cut rates to near zero, you can stimulate the domestic economy through fiscal policy, but you still need a rebound in the U.S. and European economies," he explains.
"The smart position (for Carney) is to cut rates Tuesday and wait and see what global central banks do elsewhere."
Friday, February 13, 2009
Friday the 13th
NO - not a plug for a movie of the same name just a little look at folklore about bad things. Walking under ladders, black cats crossing your path, Friday the 13th, refinancing your mortgage etc.
In ancient times, people used to spend fortunes buying charms and amulets to ward off bad luck and attract good.
Luck is pretty impersonal, but good luck definitely favors the prepared mind ... so why not apply the same principal to your finances ?
If there's one huge difference I see between successful people and everyone else it's this ... successful people take the time to prepare their minds by feeding their brains something good every once in a while.
How does that apply to my finances you ask ?
If you wonder why the Jones's next door always seem to be taking advantage of opportunities (winter holiday, stress-free living etc) then they probably did something you haven't. They fed their financial "brains" some good advice from a licensed mortgage broker and refinanced their mortgage at what some analyst are describing as the lowest rates in 65 years.
The Jones Family took the bull by the horns and said "No more waiting ... we are done with high interest rates and a river of cash flowing out the door every month. We want to be prepared if there is a layoff, illness or emergency."
They called their mortgage broker and got a free, no obligation review of their options and went ahead by consolidating all their debt into one payment at a fantastic rate. They still owe the same amount of money ... but they took a smart approach and lumped it all together under one single payment.
Their extra cash ? Topping up RSP and RESP were first on their minds ... then a week down south to refresh and relax. A return trip home and they're now plowing the extra cash savings into pre-payments on their mortgage and setting up a little savings account for 3-6 months of living expenses as an emergency fund. No more stress about whether the plant is going to cut a shift and what they'll be forced to do to pay all those bills. One payment, one bill, no stress.
Call us. We're here to help. A licensed, Ontario mortgage brokerage ... RMA-Spencer Group Mortgages.
We're back at it here at the Your Mortgage Matters blog after a little bout with the flu, bronchitis and a sore throat for good measure. Now that that is over with its business as usual.
In ancient times, people used to spend fortunes buying charms and amulets to ward off bad luck and attract good.
Luck is pretty impersonal, but good luck definitely favors the prepared mind ... so why not apply the same principal to your finances ?
If there's one huge difference I see between successful people and everyone else it's this ... successful people take the time to prepare their minds by feeding their brains something good every once in a while.
How does that apply to my finances you ask ?
If you wonder why the Jones's next door always seem to be taking advantage of opportunities (winter holiday, stress-free living etc) then they probably did something you haven't. They fed their financial "brains" some good advice from a licensed mortgage broker and refinanced their mortgage at what some analyst are describing as the lowest rates in 65 years.
The Jones Family took the bull by the horns and said "No more waiting ... we are done with high interest rates and a river of cash flowing out the door every month. We want to be prepared if there is a layoff, illness or emergency."
They called their mortgage broker and got a free, no obligation review of their options and went ahead by consolidating all their debt into one payment at a fantastic rate. They still owe the same amount of money ... but they took a smart approach and lumped it all together under one single payment.
Their extra cash ? Topping up RSP and RESP were first on their minds ... then a week down south to refresh and relax. A return trip home and they're now plowing the extra cash savings into pre-payments on their mortgage and setting up a little savings account for 3-6 months of living expenses as an emergency fund. No more stress about whether the plant is going to cut a shift and what they'll be forced to do to pay all those bills. One payment, one bill, no stress.
Call us. We're here to help. A licensed, Ontario mortgage brokerage ... RMA-Spencer Group Mortgages.
We're back at it here at the Your Mortgage Matters blog after a little bout with the flu, bronchitis and a sore throat for good measure. Now that that is over with its business as usual.
Tuesday, January 20, 2009
Bank of Canada Rate Drop
Here's some news from today's headlines ... good news for many however the lower rates also mean a dropping value in the loonie for those travelling south this winter. Don't forget to talk to your independent mortgage professional regarding interest rates and products best suited for your situation.
Bank's key rate cut to record low
OTTAWA - The Bank of Canada has chopped its key interest rate by another half percentage point to its lowest level ever, and warned that the Canadian economy will contract by 1.2 % this year.
The central bank's target for the overnight lending rate now stands at 1% - lower than in 1958, when the most-watched policy rate was 1.12 per cent.
"The outlook for the global economy has deteriorated since the bank's December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity," the bank said in its gloomiest statement yet.
In separate announcements, Toronto-Dominion Bank and Bank of Montreal
responded by announcing they have cut their prime lending rates by 50 basis points to 3 per cent. BMO said it is cutting key mortgage rates by 30 to 50 basis points.
Last fall, the bank had counted on the Canadian economy growing by 0.6 % this year. But since then, it has recognized that Canada is in recession, and now says the economy will shrink by 1.2 per cent in 2009, as the country succumbs to sagging global demand, lower energy prices and a collapse of confidence around the world.
"Canadian exports are down sharply, and domestic demand is shrinking as a result of declines in real income, household wealth, and consumer and business confidence," the bank said.
Already down in overnight trading, the Canadian dollar fell further after the bank's announcement, and was down 0.84 cents U.S. to 78.90 cents just after 9 a.m. ET.
Since slack is building up in Canada's economy and housing prices are coming down modestly, inflationary pressure should also ease, the bank explained.
Total inflation will likely fall below zero for much of 2009 because of lower energy prices. And even core inflation, which excludes energy and other volatile items, will drop to about 1.1 per cent at the end of this year, the bank said.
But the central bank sees a remarkably strong recovery in 2010, with the Canadian economy growing 3.8 per cent next year and inflation edging back up to hit the bank's two per cent target in early 2011.
In order for the recovery to take hold, the global financial system has to stabilize, the bank said, but added that that process has begun, "There are signs that these extraordinary measures [by governments and central banks] are starting to gain traction, although it will take some time for financial conditions to normalize," the statement said.
Plus, the global economy should start to benefit from "considerable" monetary and fiscal stimulus, the bank said.
Canadian banks have come under criticism for failing to pass on to customers the full amount of recent previous rate cuts by the Bank of Canada.
Canada's recovery should also be bolstered by the past depreciation of the Canadian dollar, the statement added.
The bank did not promise any further interest rates to follow. Instead, the bank pointed out that it had already reduced its key rate by three and a half percentage points since December 2007, and added that it would keep an eye on how the economy and markets develop, and decide accordingly what it should do with rates.
"Guided by Canada's inflation-targeting framework, the bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required," it said.
Economists have warned that central banks need to be prepared to quickly reverse their aggressive interest rate cuts of the past year as soon as they see signs of recovery. Otherwise, there is so much monetary and fiscal stimulus floating around that today's disinflation could easily turn into an inflation problem when economies begin to grow again.
Economists have also been on the lookout for alternative forms of boosting the economy, aside from interest rates, with the U.S. Federal Reserve's key rate already hovering around zero, and the Bank of Canada at its lowest level too.
While Bank of Canada Governor Mark Carney has said previously that he is
examining his options, there was no suggestion in Tuesday's statement that any non-conventional measure is imminent.
Still, with the federal budget just a week away, the government is expected to introduce several easing mechanisms, as well as a huge stimulus program to help ease the bite of the recession.
The Bank of Canada will issue a more complete economic outlook on Thursday.
Bank's key rate cut to record low
OTTAWA - The Bank of Canada has chopped its key interest rate by another half percentage point to its lowest level ever, and warned that the Canadian economy will contract by 1.2 % this year.
The central bank's target for the overnight lending rate now stands at 1% - lower than in 1958, when the most-watched policy rate was 1.12 per cent.
"The outlook for the global economy has deteriorated since the bank's December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity," the bank said in its gloomiest statement yet.
In separate announcements, Toronto-Dominion Bank and Bank of Montreal
responded by announcing they have cut their prime lending rates by 50 basis points to 3 per cent. BMO said it is cutting key mortgage rates by 30 to 50 basis points.
Last fall, the bank had counted on the Canadian economy growing by 0.6 % this year. But since then, it has recognized that Canada is in recession, and now says the economy will shrink by 1.2 per cent in 2009, as the country succumbs to sagging global demand, lower energy prices and a collapse of confidence around the world.
"Canadian exports are down sharply, and domestic demand is shrinking as a result of declines in real income, household wealth, and consumer and business confidence," the bank said.
Already down in overnight trading, the Canadian dollar fell further after the bank's announcement, and was down 0.84 cents U.S. to 78.90 cents just after 9 a.m. ET.
Since slack is building up in Canada's economy and housing prices are coming down modestly, inflationary pressure should also ease, the bank explained.
Total inflation will likely fall below zero for much of 2009 because of lower energy prices. And even core inflation, which excludes energy and other volatile items, will drop to about 1.1 per cent at the end of this year, the bank said.
But the central bank sees a remarkably strong recovery in 2010, with the Canadian economy growing 3.8 per cent next year and inflation edging back up to hit the bank's two per cent target in early 2011.
In order for the recovery to take hold, the global financial system has to stabilize, the bank said, but added that that process has begun, "There are signs that these extraordinary measures [by governments and central banks] are starting to gain traction, although it will take some time for financial conditions to normalize," the statement said.
Plus, the global economy should start to benefit from "considerable" monetary and fiscal stimulus, the bank said.
Canadian banks have come under criticism for failing to pass on to customers the full amount of recent previous rate cuts by the Bank of Canada.
Canada's recovery should also be bolstered by the past depreciation of the Canadian dollar, the statement added.
The bank did not promise any further interest rates to follow. Instead, the bank pointed out that it had already reduced its key rate by three and a half percentage points since December 2007, and added that it would keep an eye on how the economy and markets develop, and decide accordingly what it should do with rates.
"Guided by Canada's inflation-targeting framework, the bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required," it said.
Economists have warned that central banks need to be prepared to quickly reverse their aggressive interest rate cuts of the past year as soon as they see signs of recovery. Otherwise, there is so much monetary and fiscal stimulus floating around that today's disinflation could easily turn into an inflation problem when economies begin to grow again.
Economists have also been on the lookout for alternative forms of boosting the economy, aside from interest rates, with the U.S. Federal Reserve's key rate already hovering around zero, and the Bank of Canada at its lowest level too.
While Bank of Canada Governor Mark Carney has said previously that he is
examining his options, there was no suggestion in Tuesday's statement that any non-conventional measure is imminent.
Still, with the federal budget just a week away, the government is expected to introduce several easing mechanisms, as well as a huge stimulus program to help ease the bite of the recession.
The Bank of Canada will issue a more complete economic outlook on Thursday.
Tuesday, November 6, 2007
Are you satisfied with your mortgage ?
Thanks to "good interest rates" and longer amortizations keeping monthly payments low, about 4 out of 5 of us are happy with our mortgage according to a recent poll of 2000 Canadians taken on behalf of CAAMP in late September/early October 2007. In just the last year, over 1/3 of the survey sample indicated they had already taken a longer amortization period than the til then "normal" 25 year period. Nearly 6 out of 10 said that more choice in options made them happy and 28% of respondents confirmed they had used the services of a mortgage professional. Surprisingly, of those who had taken out their mortgage in the last year, 43% of them used a mortgage professional. Respondents in Ontario and Quebec were positive about buying a house at this time.
Make sure you contact a mortgage professional when you are thinking about purchasing or refinancing in order to get the best unbiased advice to create a mortgage plan just for you.
That's all til next time and remember ... your mortgage matters.
Make sure you contact a mortgage professional when you are thinking about purchasing or refinancing in order to get the best unbiased advice to create a mortgage plan just for you.
That's all til next time and remember ... your mortgage matters.
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