The Bank of Canada raises rates when they begin to see sign of the economy recovering. The economic indicators are forecasted based off of their current figures. The past 3 rates hikes have been predicated on the notion the Canadian economy was strengthening and to a certain degree it was. However, the growth which we began to see in the spring may have been brought on by special events such as the Vancouver Olympics, the rush to purchase major investments such as real estate before HST, recent automotive incentives and of course the fiscal stimulus package implemented by the government. Recent economic data is now showing our economy is beginning to weaken again and even more so than our neighbouring country to the south. The first quarter momentum we experienced in consumer sales, job growth and real estate has stalledand in some cases shown real signs of deterioration. Economist are now looking for our third quarter growth rate to fall under 1%, far below the 2% we experienced in the second quarter of this year. Brian Bethune, the Chief Economist at IHS Global Insight sees the Bank of Canada's projected growth rate as being too optimistic and believes the Bank of Canada should look at reconsidering their recent rate hikes. At worst, he sees the Bank of Canada "taking a break" from raising rates. http://www.financialpost.com/news/Recovery+declining+dramatically+economist/3563588/story.html
Shaun Pierce, AMP
Mortgage Consultant
(250) 717 – 8949 (Ext. 102)
spierce@creativemortgage.ca
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Economy has had fake growth... I also think (not being an economist) that if rates rise too much we will see another bubble burst. But this time some country will not have heavy stimulus as an option as they are overdosing on debt. Can anyone else see the elephant in the room?
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