Latest data on the state of Canadian employment is making a potential increase on the Bank of Canada’s benchmark interest rate more likely by the day, according to Dominion Lending Centres
Such a movement, which is expected any time this week, would be the first hike in the rate in 7 years.
“The Bank of Canada has been signalling a rate hike for a few weeks, despite continued low inflation, as incoming economic data have been surprisingly strong,” DLC
chief economist Dr. Sherry Cooper wrote in a recent post on the broker network’s website. “The Canadian economy has been performing well with 3.7% growth in GDP in the first quarter and the second quarter gain is now likely to be roughly 2-3/4%.”
Joblessness declined to 6.5 per cent nationwide, while employment (mostly part-time posts) swelled by 45,400 positions in June. On a year-over-year basis, employment rose by 351,000 jobs (1.9 per cent), most of which was full-time employment.
The potential BoC hike will be coming just a few days after the Royal Bank
of Canada’s increased its two-year, three-year, and five-year fixed-term mortgage rates by 20 basis points each.
“Higher mortgage rates will come on the heels of a marked slowdown in the housing market in the Greater Toronto Area and surrounding region. According to data released this week by the Toronto Real Estate Board, June resales activity continued its abrupt slowdown, which began with the April 21 imposition of a foreign buyer’s tax in the Greater Golden Horseshoe,” Cooper explained.
“Over the same period, sellers have increased sharply as new listings and active listings have surged, putting downward pressure on average home prices. Year-over-year gains in house prices have more than halved from a 30% y/y gain in March to less than 15% most recently,” she added.
RBC raises fixed-term mortgage rates
Plausible scenarios in the event of a BoC rate hike