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Greetings to all and a warm Welcome to New Subscribers.
We are starting to see all the indicators pointing to a great year in real estate. Here is an article I came across showing this.
The Bank of Canada pared back its 2004 and 2005 growth forecasts Thursday because of the impact of the Canadian dollar and said it expects to take a bit longer to raise interest rates than originally forecast.
Thursday's update to the central bank's monetary policy report came two days after the central bank left its key policy rate at 2.5 per cent, citing the impact of the Canadian dollar.
After two increases last year, the bank moved to the sidelines in December largely because of the loonie's strength and how that rise was affecting the economy.
In Thursday's report, the central bank said it now expects growth in 2004 to advance at an annual rate of 2.7 per cent. In October, when it released its last formal outlook for the Canadian economy, it pegged growth for the year at 2.9 per cent.
For 2005, the bank is now looking for annual growth of 2.8 per cent, down from its earlier forecast of growth closer to 2.9 per cent.
“The Canadian economy is expected to operate a little further below its full production capacity in 2005 than was anticipated in the last report, largely reflecting the dampening effects on aggregate demand of the recent appreciation of the Canadian dollar,” the bank said.
By 2006, growth is expected to pick up to slightly more than 3 per cent, putting it just ahead of the bank's assessment of the country's economic growth potential.
In line with its revised outlook, the Bank of Canada also said that the pace of its reduction in monetary stimulus is likely “to be slower than envisioned” in October.
Mr. Dodge also told reporters in a news conference broadcast live on the Internet that the central bank doesn't have a preconceived notion of where interest rates should head, but rate sets policy based on its goal of keeping inflation within a target range.
“Our commitment is to our policy objective of targeting 2 per cent inflation and keeping the economy operating close to full capacity,” he said.
“Our commitment is not to any projected interest rate path.”
The bank now sees the annual core rate of inflation — which excludes the eight most volatile components of the consumer price index —averaging just above 1.5 per cent in the first half of 2005, before gradually rising to the bank's 2-per-cent target near the end of next year.
Many analysts don't expect to see borrowing costs in this country climb again until the second half of this year. A small number have suggested the bank might even have to cut rates to offset the impact of the rising dollar.
However, economists Thursday said Thursday's report offers little indication that rate cuts are on the horizon.
“The bank is not eyeing rate cuts by any stretch of the imagination,” TD Securities chief strategist Marc Lévesque said.
“In fact, it explicitly states in the report that the pace of interest rate increases will merely be slower.”
The Canadian dollar rose almost 8 per cent against its U.S. counterpart last year, as the greenback faded on world currency markets. In November, the loonie topped 85 cents (U.S.) to mark its highest close since 1992.
Over the last two years, the loonie has gained 25 per cent against the greenback, moving from an average trading price of 65 cents (U.S.) in January, 2003, to an average price of 82 cents in the current month. (The loonie was trading at 80.84 cents (U.S.) on Thursday, down from Wednesday's closing price of 81.04 cents.)
The bank also noted Thursday that the driver for the Canadian dollar has shifted in recent months.
Earlier in the two-year span, a combination of higher foreign demand, climbing commodity prices and a weaker U.S. dollar had contributed to the loonies rise.
However, more recently, the gains appear to be largely due to a declining greenback on global markets. That rise is largely associated with external factors — like an expanding fiscal deficit in the United States — but also runs the risk of triggering a reduction in foreign demand for Canadian goods.
“All other tings being equal, this would require monetary policy to be more stimulative than it otherwise would have been,” Thursday's report noted.
Thursday's update also said exports — which make up about 40 per cent of Canada's economy — were “considerably weaker” than expected, reflecting the impact of the stronger loonie and some moderation in the growth of global demand.
“While ongoing growth abroad implies further gains in demand for Canadian exports, these gains are expected to be more than offset by faster growth in imports,” the bank said.
“The past and recent appreciation of the Canadian dollar is expected to dampen export growth and to boost imports over the projection period.”
In terms of the global outlook, the central bank said the world economy is likely to be “a touch weaker” in the near term, although there is also “greater confidence in the momentum of the U.S. economy.” The bank is predicting that the U.S. economy — this country's biggest trading partner — will grow by close to 4 per cent both this year and next.
Oil prices, which are expected to average around $47 (U.S.) a barrel in the first half of this year, are expected to ease to about $42 a barrel by the latter part of next year, according to the bank's forecast.
Click here for an economic report from CIBC.
It is important because it gives a snap shot of the Bond Market which is closely
Tied to the mortgage rates. And also lots of good information about where
Our economy may be headed.
I trust this information will come in handy and help you to stay informed.
One Small Saving on your Interest Rate will be worth Thousands! in the Long Term.
Feel Free to call anytime…
Dan Heon
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