{"id":12319,"date":"2017-05-24T12:03:09","date_gmt":"2017-05-24T16:03:09","guid":{"rendered":"http:\/\/www.zoocasa.com\/blog\/?p=12319"},"modified":"2017-05-24T12:03:09","modified_gmt":"2017-05-24T16:03:09","slug":"no-change-or-mention-of-home-capital-in-bank-of-canada-may-announcement","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/no-change-or-mention-of-home-capital-in-bank-of-canada-may-announcement\/","title":{"rendered":"No Change \u2013 or Mention of Home Capital \u2013 in Bank of Canada May Announcement"},"content":{"rendered":"<p>The Bank of Canada (BoC) stuck with status quo in its <a href=\"http:\/\/www.bankofcanada.ca\/2017\/05\/fad-press-release-2017-05-24\/\" target=\"_blank\">May announcement<\/a>, opting to leave its trend setting Overnight Lending Rate at \u00bd per cent. The rate, which dictates variable borrowing costs for consumer banking products, has stayed put since July 2015 \u2013 and likely will until at least 2018, despite evidence of an improving Canadian economy. The Bank Rate is \u00be per cent, and the Deposit Rate is \u00bc per cent, accordingly.<\/p>\n<h2>Inflation Remains Below Target<\/h2>\n<p>The central bank&#8217;s statement\u00a0indicates the three measures of core inflation, which it bases its decision on, are still too low to warrant any change to interest rates. While there have been improvements in the energy sector and job market, dropping food prices and poor wage growth leave excess capacity in the economy.<\/p>\n<p>However, it paints the cheeriest picture in recent memory regarding the oil industry, stating: \u201cThe Canadian economy\u2019s adjustment to lower oil prices is largely complete and recent economic data have been encouraging, including indictors of business investment.\u201d It has forecasted that projected output will have expanded at 3.8 per cent in the first quarter of the year, building on 3.2 per cent realized in Q4 of 2016.<\/p>\n<p><strong>Related Read: <a href=\"https:\/\/www.zoocasa.com\/blog\/no-change-for-april-bank-of-canada-rate-despite-stronger-economy\/\">No Change for April Bank of Canada Rate Despite Stronger Economy<\/a><\/strong><\/p>\n<h2>The Housing Market: Too Big to Fail?<\/h2>\n<p>It also acknowledged that \u201cconsumer spending and the housing sector continue to be robust on the back of an improving labour market, and these are more broadly based across regions.\u201d \u2013 and this is likely the key to its reluctance to hike rates prematurely.<\/p>\n<p>The reality is the housing market is a main driver of the economy in the absence of oil. Given a large chunk of buying activity is fueled by the record low interest rate environment enjoyed by borrowers over the last several years, the BoC would be remiss to increase rates while indebted Canadian households are so vulnerable to interest rate shock.<\/p>\n<p>In fact, according to a <a href=\"https:\/\/www.thestar.com\/business\/real_estate\/2017\/05\/23\/most-canadians-would-have-trouble-with-10-per-cent-hike-in-mortgage-payments-poll.html?source=newsletter&amp;_ctids=2444%7cQverpg%2fSebz+Rznvy%7c162%7c39016%7c35104&amp;_ctdigest=tm3nNgFFAsvMotmPpCju\" target=\"_blank\">poll out this week from Manulife<\/a>, as many as three quarters of Canadians say they would have difficulty paying their mortgage should their payments rise by 10 per cent \u2013 a scenario that could be prompted by as much as a 1 per cent BoC increase. Said ManuLife President and CEO Rick Lunny, \u201cWhat these people don\u2019t realize is that we\u2019re at record low interest rates today\u2026 When you put it into that context, they\u2019re not really prepared for what is inevitable. Sooner or later, interest rates are going to rise.\u201d<\/p>\n<h2>U.S. Uncertainty and Global Growth<\/h2>\n<p>On a global risk scale, the BoC indicates there are still too many uncertainties that could harm future growth \u2013 for example, proposed changes to American corporate tax brackets and a potential renegotiation of the North American Free Trade Act. However, global growth is occurring at the pace it predicted in its April Monetary Policy Report. \u201cThe global economy continues to gain traction and recent developments reinforce the Bank\u2019s view that growth will gradually strengthen and broaden over the projection horizon,\u201d the BoC states. \u201cAs anticipated, growth in the United States during the first quarter was weak, reflecting mostly temporary factors. Recent data point to a rebound in the second quarter. \u00a0The uncertainties outlined in the April MPR continue to cloud the global and Canadian outlooks.\u201d<\/p>\n<h2>No Mention of Home Capital<\/h2>\n<p>The BoC made no reference whatsoever to the recent issues plaguing <a href=\"https:\/\/www.zoocasa.com\/blog\/what-mortgage-borrowers-should-know-about-home-capital-group\/\">alternative mortgage lender Home Capital<\/a> and the resulting fears of an impending subprime mortgage crisis. While it\u2019s not in the Bank\u2019s motis operandi to comment on the actions of specific consumer lenders, there have been calls for it to acknowledge of the lender\u2019s downturn, and perhaps provide insight for nervous investors. Most notable were comments from CIBC Chief Economist Benjamin Tal earlier this month that \u201cSomebody has to stand for Canada, and that somebody must be the central bank.\u201d However, BoC Governor Stephen Poloz has directly avoided comment, staying mum even when under journalist pressure.<\/p>\n<p>However, it appears the Ontario Securities Commission\u2019s investigation into Home Capital\u2019s practices, or speculated bailout should it continue to bleed cash, aren\u2019t registering as economic risks from the BoC\u2019s perspective; saying nothing could be an indication that markets \u2013 and borrowers \u2013 have nothing to fear.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Bank of Canada (BoC) stuck with status quo in its May announcement, opting to leave its trend setting Overnight Lending Rate at \u00bd per cent. The rate, which dictates variable borrowing costs for consumer banking products, has stayed put since July 2015 \u2013 and likely will until at least 2018, despite evidence of an [&hellip;]<\/p>\n","protected":false},"author":39,"featured_media":12321,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":[],"jnews_primary_category":[],"footnotes":""},"categories":[172,33],"tags":[],"class_list":["post-12319","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mortgage-news","category-real-estate-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>No Change in Bank of Canada May Announcement | Zoocasa Life<\/title>\n<meta name=\"description\" content=\"The Bank of Canada May announcement reveals no change to its trend setting interest rate, meaning borrowers 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