One thing that the Bank of Canada made clear with today’s announcement is that housing affordability will not be negatively impacted because of rising rates – at least not in 2013.
Not surprisingly, the Bank of Canada left the rate unchanged at 1% but it included a phrase into the news release which caught some attention.
Below is a round-up of the bank commentary.
ATB: “Over the past few years, the Bank has maintained an upward bias – a suggestion that rates will rise at some point in the future. This morning, the Bank’s statement was more dovish – the upward bias remains, but with even less urgency than before. In the final line of its release, the Bank states:
“…the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawl will likely be required.”
Given the state of the global economy, and the slack here in Canada, rates could easily remain this slow for another 12 to 18 months.”
TD Bank: “Persistent weakness in inflation – January’s reading marked the tenth consecutive month that inflation has come in below the Bank’s 2.0% target – also points to the Bank remaining on the sidelines until 2014 when it comes to interest rate moves. The forward-looking language still possesses an upward bias regarding interest rate movements, but less urgency was communicated relative to January.” (Read entire release)
Bank of Montreal: “With continued slack in the Canadian economy, the muted outlook for inflation, and the more constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required…” Note the ranking of priorities — stimulus will remain in place, and them some withdrawal may be required. Of course, the “period of time” could mean one month or one decade, so this doesn’t really change much on the timing front. But by keeping the some withdrawal statement, they are basically saying “forget about rate cuts. That next move now looks to be very far off however, and we remain comfortable with the call that rates are unlikely to begin moving higher until the second half of 2014.” (Read entire release)