The Bank of Canada’s decision Wednesday to freeze interest rates at 1.75% was no great surprise but the Monetary Policy Report was a welcome insight into how the BoC sees the state of the economy.
Noting the recent slowdown in the economy, Governor Stephen Poloz said that the bank’s Governing Council believe that it will prove to be temporary and that the global economy will adjust to current challenges including trade conflicts.
He spoke of the continued issues for the oil sector which in turn impacts housing in those markets that are more dependent on the sector.
However, for both oil industries and other exporters who would be affected if CUSMA was not ratified, the Governor said that weakness in the first part of 2019 is expected to give way to growth as the year progresses.
For housing markets, the BoC acknowledged that previously frothy markets including the Greater Toronto and Greater Vancouver areas have seen “significant revision” in price expectations.
But Stephen Poloz also pointed to other markets such as Halifax, Montreal, Ottawa, and Winnipeg which have seen the “solid activity” that would be expected in a growing economy with rising population and job creation.
He also highlighted the reduction in mortgage rates driven by lower global bond yields.
All things considered, the BoC expects the Canadian housing sector to “return to growth overall later this year.”