Interest Rates: The More Things Change, The More They Stay The Same

A famous bard once said, “All the World’s a Stage.”  That, as it turns out, is very much the case in terms of global economics and the ensuing drama that has unfolded since the Bank of Canada’s last rate announcement in July.

In the last six weeks, there has been a bi-partisan showdown, nervous hours in advance of the raising of the US debt ceiling, a consequent debt downgrade, renewed fears of financial collapse in various areas of Europe- and a roller coaster ride up and down on world markets, with peaks and valleys sharp and swift enough to rival an amusement park ride.

There has been released several sets of data- most recently Stats Can reporting that the Canadian economy has actually retracted for the first time in several months, suggesting that the hold on economic recovery, that seemingly has kept the engines of commerce for the past months, may be more tenuous than once thought.It had seemed an absolute certainty- not very long ago, that rates would be raised this fall, after having been so low for such an extended period of time.What a difference a few weeks makes, especially on the stage of global economics.

If history is any guide at all, the Bank of Canada will have little choice but to hold their current position come Wednesday in the next rate announcement.

A recent  economist poll done by Reuters suggests overwhelmingly that there will be no big surprises in the next interest rate announcement.

The surprises have come in the form of sustained blows as one major economic event took swings at global economic stability. 95% of those polled indicate that they feel that the Bank of Canada will not do much of anything on Wednesday.In fact, many have indicated that it may be as long as Q2 2012 before the rates start their ascent again.

Good news for consumers? Perhaps- as this seemingly time-limited offer for low cost borrowing seems to have been extended. 

This will, no doubt be well received by the housing industry- that is seeing a slow and steady climb in both sales activity and prices across the country- and will likely continue to be buoyed by consistent affordability.

Some members of our Propertywire.ca  community  echo the sentiment reflected by many of the economists.

Newmarket Realtor Mike Cartwright points out that despite our good fortune here at home, world economies are intricately interconnected- and that Canada is not an economic island: “I believe that the Bank of Canada will keep rates the same. Canada seems to be weathering the Global economic climate quite well with a strong housing market and our banks making record profits. But we cannot ignore the environment of slower growth in the U.S. and Euro zone….Based on the Global Economy we will keep our rates the same to create higher growth.”

Adam Hawryluk, Mortgage Advisor, Canadian Mortgage Experts DLC, supports the majority opinion “As you’ll probably hear from almost everyone, I believe the overnight rate will stay the same from BoC.”“As far as rates from lenders, I feel rates are going remain relatively stable, then eventually sluggishly move up. We’ve seen the discount on variable rates being reeled in a bit recently, but with no huge gains for either the Canadian or US economy recently, we should be spoiled with low fixed rates for a while still.”

So then, the question of “not if, but when,” that has been a thematic thread for several of the last rate announcements has been replaced with “why and how- and what will be the impact?”

Stay tuned for Wednesday’s Bank of Canada interest rate announcement. Rates remained steady