Kiyoko Fujimura

Buzzbuzzhome Corp.
October 19, 2010

The Bank of Canada decided to hold off on rate hikes today after increasing rates by 25 basis points three times in a row. Why the sudden halt?

Well, things aren’t going along as well as Carney had hoped. The US recovery is really a misnomer since there hasn’t been a meaningful recovery really. In addition, the recovery will be hindered by consumers and governments attempting to pay down debt accumulated during the recession.

Carney also pointed to a slowing housing market as a reason for his pause in further interest rate hikes. Because the housing market was largely fueling the Canadian economic recovery and sales have now slowed, rate hikes could simply exacerbate the problem.

Carney has also reassessed market growth projections for Canada. They’re a bit gloomier, but not by a crazy amount or anything.

According to the Globe and Mail:

The Canadian economy will grow at a 3-per-cent pace this year, 2.3 per cent in 2011 and 2.6 per cent in 2012, the central bank said. That compares with Mr. Carney’s July forecast of 3.5 per cent growth for this year, 2.9 per cent in 2011 and 2.2 per cent in 2012.

Just to put things in perspective. The benchmark rate is at 1%. That is still INSANELY low. So despite the trio of interest rate hikes, that doesn’t mean mortgages are becoming unaffordable or anything. So don’t overextend yourself and think that rates aren’t going to go up, they will!

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