What Bank of Canada’s Latest Assessment Means for Mortgage Rates
Guest Post by Dave Larock
The Bank also issued its latest policy statement, which is basically an assessment of how events both at home and abroad are influencing its monetary-policy direction. Here are the highlights from the BoC’s latest policy statement, with my accompanying comments:
- Overall global economic growth is evolving as the BoC anticipated in its October Monetary Policy Report (MPR). The U.S. economy “continues to grow at a solid pace”, and while the Bank noted that “private domestic demand has proven slightly less robust than expected”, I don’t think this is too concerning because Americans are saving more instead of spending these days. To wit, the U.S. personal saving rate rose steadily from 4.80% in May of this year to 5.60% by October, which is the highest it has been in nearly three years.
- The Bank notes that “ongoing terms-of-trade adjustments and shifting growth prospects across different regions are contributing to exchange rates movements”, and that against this backdrop “policy divergence is expected to remain a prominent theme”. In other words, countries are experiencing very different economic growth trajectories which are leading to exchange-rate swings and are impacting the relative demand for imports and exports. These diverging economic circumstances require the central banks to undertake very different monetary-policy actions, and the BoC calls this a “prominent theme” that will continue to have a significant impact on global economic growth going forward.
David Larock is an independent full-time mortgage planner and industry insider. Visit his blog for many more interesting articles and some great mortgage advice.