Greetings to all and a warm Welcome to New Subscribers.
As the close of 2007 nears the economic environment continues to be exciting. With a still strong Canadian dollar and potential cuts in interest rates, the market
remains interesting watch...
The Canadian Mortgage Team Alberta has been keeping busy with new clients acquired at Quick Start in Edmonton and we are looking forward
to an even busier December.
We hope to be settled into our new offices in Calgary located at 127, 11198 - 42nd Street SE by the beginning of December 2007. Our phone
numbers and Edmonton contact information remains the same. Until then - it's business as usual and as always we're here to help you with any financial needs or questions you may have.
Rate Cut Speculation
A week or so ago most people thought the Bank of Canada would keep rates unchanged for a while.
Things can change fast.
Many now feel the Bank of Canada may soon need to cut rates to keep our economy growing.
Why? Well, the BoC's David Dodge says risks to the world economy are more serious today than one month ago. Dodge says he'll need to take this "into account" at upcoming interest rate meetings.
In addition, our economy is increasingly being weighed down by a strong Canadian dollar. 1/3 of Canada's GDP is based on exports to the U.S., and it's got 16% more expensive for Americans to buy our products since Jan. 1, 2007.
J.P. Morgan economist Ted Carmichael says, “We now expect that the Bank of Canada will need to cut its policy rate by 25 basis points on each of its next four decision dates through April." If he's right, rates could drop 1% by next spring. A more consensus view is probably 1/4% to 1/2%.
Despite the worry, some still feel that consumer spending, demand for our raw materials, and a strong housing market might offset the global weakness threatening Canada's economy. If so, rates will likely stay put.
Whatever the case, almost everyone can now agree that there is no longer any urgency to lock in mortgage rates.
Loonie dips on news that inflation moderating in Canada
OTTAWA - The Canadian dollar pulled back after an early-morning report showing inflation pressures are easing, giving the Bank of Canada more room to cut interest rates.
Statistics Canada said Tuesday that October's inflation slipped to an annual rate of 2.4 per cent, from 2.5 per cent in September, despite higher gasoline and housing prices.
And the core index, a key measure for the central bank, dipped below the two per cent target to 1.8 per cent on an annual basis, the weakest growth in the key index since June 2006.
The core index excludes the eight most volatile components, such as fuels and fresh fruit, and is regarded as a more accurate measure of underlying inflationary pressure in the economy.
"The better-than-expected news on the inflation front is providing some flexibility for monetary policy," said Bank of Montreal senior economist Michael Gregory.
"It's looking more likely that (bank governor) David Dodge's swan song will be rate cuts, reflecting lower-than-projected inflation, credit concerns and economic growth risks."
The Canadian dollar, which had opened at 102.05 cents US - up half a cent from Monday's close - fell to 101.66 cents US after the inflation report, before edging up slightly.
The central bank typically uses higher interest rates to curb inflation, but has had less freedom to do so since the Canadian dollar topped parity with the greenback in late September.
Gasoline prices continued to be a significant factor in the inflation calculation, both negative and positive, as prices at the pumps jumped 13.5 per cent in October from the same period last year, when prices had fallen significantly.
But on a monthly basis, gasoline prices actually fell 0.3 per cent from September, after posting a 0.2 per cent gain the previous month.
Excluding energy, the all-items index rose only 1.9 per cent in October on an annual basis, with lower prices for leasing automobiles mainly responsible for both drops.
Calculated on a month-to-month basis, inflation was 0.3 per cent less in October from September, while the core index dropped 0.2 per cent from the previous month.
Statistics Canada said lower prices for traveller accommodation (minus 8.8 per cent), autos (minus 1.4 per cent), and women's clothing (minus 2.3 per cent) contributed to the month-to-month decrease in core inflation.
As well, the price for fresh fruit dropped 14.6 per cent, while computer equipment and supplies costs fell 13.8 per cent.
On an annualized basis, besides gasoline, other major price drivers were owned housing, which gained 4.8 per cent in October, and mortgage interest costs, which rose 6.7 per cent. The agency said the increases reflect the larger amounts Canadians had to borrow to buy a home because of house price increases.
Canadians also paid three per cent more for restaurant meals and 3.8 per cent more for property taxes in October from the same month last year.
Regionally, the hot economy in the prairies continued to drive up prices on an annualized basis, with Alberta recording a five per cent inflation rate hike, followed by Saskatchewan at 3.6 per cent.
Inflation also rose higher than the national average in some Atlantic Canada provinces, particularly New Brunswick, where prices rose 3.3 per cent on an annualized basis.
The agency also released rates for major cities, but cautioned that figures may fluctuate widely because they are based on small statistical samples (previous month in brackets):
- St. John's, N.L., 2.3 (1.3)
- Charlottetown-Summerside, 3.1 (2.3)
- Halifax, 2.4 (2.4)
- Saint John, N.B., 3.2 (2.8)
- Quebec, 1.8 (1.7)
- Montreal, 1.7 (1.8)
- Ottawa, 2.3 (2.4)
- Toronto, 2.5 (2.5)
- Thunder Bay, Ont., 1.4 (1.6)
- Winnipeg, 1.8 (2.8)
- Regina, 3.0 (3.3)
- Saskatoon, 4.6 (4.7)
- Edmonton, 5.4 (5.2)
- Calgary, 4.6 (4.0)
- Vancouver, 1.8 (2.1)
- Victoria, 0.8 (1.2)
Here's what happened in the provinces and territories (previous month in brackets):
- Newfoundland and Labrador 2.1 (1.3)
- Prince Edward Island 3.1 (2.2)
- Nova Scotia 2.3 (2.1)
- New Brunswick 3.3 (2.9)
- Quebec 1.9 (1.9)
- Ontario 2.3 (2.3)
- Manitoba 1.9 (2.8)
- Saskatchewan 3.6 (3.8)
- Alberta 5.0 (4.6)
- British Columbia 1.6 (1.9)
- Whitehorse, Yukon 3.9 (3.4)
- Yellowknife, N.W.T. 3.7 (3.5)
- Iqaluit, Nunavut 3.7 (3.9)
© The Canadian Press, 2007
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