Carney Confident Canada can survive Economic Crisis

Bank of Canada Governor Mark Carney delivered an assuring message to Canadians yesterday. In that message he stated that he expects the strength of Canadian financial structures to carry it through the growing international crisis.

He also stated that even if other country's fell back in to a recession Canada's economy would remain in tact. This is due to the fundamental strength of Canada's banking system, which was named the best banking system in the world for the 4th consecutive year.

That being said, expect the Bank of Canada to hold interest rates until they can see some stability in the work economy.

Click here to read the complete article from CTV.ca

Bank of Canada keeps overnight rate at 1 percent

The Bank of Canada has done a 180 shift and held the bank rate at 1% (3% prime rate). Earlier this year is was a forgone conclusion that the BoC was going to start to raise rates this fall.

Several factors have forced the banks hand, such as the global economic outlook has deteriorated in recent weeks. The European debt crisis has intensified, along with the US downgrade of credit from AAA to AA, plus the US recession was deeper and has been shallower than previously reported. Recent data also concludes that the US growth recovery will be weaker than anticipated.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of slowing global economic momentum and heightened financial uncertainty

The next BoC update is October 25, 2011.

Click here to read the entire article from the Bank of Canada.

Home buyers worried about being pushed out of the market by higher mortgage rates received a little good news this week.

With all the turmoil in the world financial markets in the last two weeks, the pressure has been taken off banks to raise interest rates. The longer the turmoil, the more likely the mortgage rates are to fall and the Bank of Canada will be pressured to lower the overnight rate. 180% switch from discussion of a pending rate increase in the fall.

The Bank of Canada has not raised it's overnight rate in 2011, making interest rates among the lowest in Canadian history.

This is a benefit to first-time buyers and anyone who is looking to renew their mortgage because lower rates reduce the cost of borrowing.

Read more at:

http://www.vancouversun.com/business/Interest+rates+calm+turbulent+times/5239589/story.html#ixzz1UkFKHx1v

Bank of Canada Maintains Rate Target at 1%

The Bank of Canada this week announced that it is maintaining its target for the overnight rate at 1%. The bank prime lending rate remains at 3%.

The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household spending and a slow growth in employment. While growth in Europe has been stronger than expected, fiscal cuts in many countries reflect a weaker growth than originally anticipated. Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets.

In Canada, the economic expansion is proceeding as projected, although the expected rotation of demand is somewhat slower than had been anticipated. Household spending remains solid and business investment vigorous. Net exports remain weak, due to modest U.S. demand and ongoing competitiveness challenges, particularly the persistent strength of the Canadian dollar. Despite increased global risk aversion, financial conditions in Canada remain very active and private credit growth is strong.

The bank expects growth in Canada to re-accelerate in the second half of 2011. Over the projection horizon, business investment is expected to remain strong, household spending to grow more in line with disposable income, and net exports to become more supportive of growth. Relative to the April projection, growth in household spending is now projected to be slightly firmer, reflecting higher household income, and net exports to be slightly weaker, reflecting more subdued U.S. activity. This was the 10th consecutive month that there was no change to prime rate. The Bank of Canada did hint that there may be rate increases on the horizon as the Canadian economy grows closer to full capacity.

Rates hikes may be on hold until 2012

Over the past few months, major economists have backpeddled on their rate hike predictions. Initially the rates were expected to start to rise as early as July, however most economists are now saying it could be as late as the new year. Major factors include:

• A parade of weak economic data from the U.S.—our key trading partner
• Core inflation that remains manageable
• Global economic risks
• Debt-laden consumers that are only cautiously spending
• A U.S. housing market that's double-dipping
• U.S. unemployment that may be structurally and permanently elevated
• A Canadian dollar that is still acting as a brake on our economy.

To read the full article from Rob McLister form Canadian Mortgage Trends Click here

Bank of Canada maintains overnight rate at 1 per cent

As expected the Bank of Canada maintained its overnight rate at 1% (bank prime rate is 3%). In Canada the economic recovery is proceeding broadly as expected, and the US economy continues to grow at a modest pace. The disasters that struck Japan as well as the continued crisis and economic instability in in Europe, coupled with the high CDN dollar has been key factors in the hold on rates. Expect the rates to hold through the summer.

Click here to read the complete article from news wire

BoC rate hike on hold until September: RBC

Due to the uncertainty of the speed of the economic recovery in Europe and its potential spillover effect in to Canada, The Bank of Canada plans to delay any rate hikes until September 2011. Initially the BoC had planned to start to raise interest rates as early as this July.

Dawn Desjardins, assistant chief economist with RBC states “combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought. Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”

So far, the Canadian economy looks to be holding steady with data suggesting 0.3% growth in March after a dip in February. Monthly growth figures put the economy on pace for 3.7% growth with risks on the upside.

Persistent strength in housing and growth in household credit, however, means the BoC cannot wait too long before taking action to avoid inflationary pressure.

Click here to read the complete article from Eric Lam of the Financial Post.