Interest Rate Hike. The Question is When?

Canada's latest inflation numbers have once again turned attention toward the Bank of Canada's plans for interest rate increases.

Core inflation – which the central bank uses for its policies – jumped by an unexpected 4-tenths to 2.1% in August. However that is still well within the Bank's target range and it remains to be seen if this is a sustained acceleration that could require interest rate intervention.

Of course the American influence remains strong and the U.S. Fed has quieted the debate about its next move. It's latest policy statement continues to use the phrase "considerable time" when referring to its pledge to keep borrowing costs down. The Fed also indicated it would like to see stronger employment numbers before raising rates.

The Bank of Canada is definitely going to raise rates. The question they still don't know is when. All data indicates it will take some time before we see a rise.

No Housing Bubble

The three Canadians who could be said to have the biggest influence over the country's housing market have all expressed their confidence in it.

Finance Minister Joe Oliver, Bank of Canada Governor Stephen Poloz and CMHC CEO Evan Siddall were at a meeting of G20 financial heads in Australia and all said they see no bubble in the Canadian market. But they are watching it closely.

In a speech, Siddall said CMHC research shows "there are no immediate problematic housing market conditions at the national level."

Siddall did caution, though, that action could be required if the market doesn't cool as predicted.

The Bank of Canada's Poloz repeated his concern that housing is a "vulnerability" for Canada but, he said, "we don't see the housing market as particularly hazardous and we certainly don't consider it to be a bubble."