Lower sales activity will make Canadian housing contribute less to the national economy over the next two years, the central bank warns
In its Wednesday (October 19) statements, Canada’s central bank warned that the national economy will experience slight declines in output amid new federal mortgage rules, which are projected to dampen home sales numbers.
The Bank of Canada’s report revealed lower growth forecasts for this year and the next “due in large part to slower near-term housing resale activity,” even as it maintained its key policy rate of 0.5 per cent. The BoC adjusted its forecasts to 1.1 per cent in 2016 and 2 per cent in 2017, downward from 1.3 per cent and 2.2 per cent, respectively.
In its Monetary Policy Report, the central bank predicted a major shift in the home building industry as developers might set their sights on constructing smaller homes, BNN reported.
The BoC also forecast a 0.3 per cent decline in real GDP by the end of 2018 as a result of the regulatory changes, with the economy getting back in shape only by the middle of that year.
Speaking to members of the press, Governor Stephen Poloz said that the BoC governing council raised the possibility of increasing monetary stimulus “in order to speed up the return of the economy to full capacity.”
“However, we identified a number of significant uncertainties... Importantly, the government’s actions to mitigate risks in the mortgage market were not seen as an impediment to easier monetary policy.”
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New rules will pave the way for a less anxious BoC—analysts
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The Bank of Canada’s report revealed lower growth forecasts for this year and the next “due in large part to slower near-term housing resale activity,” even as it maintained its key policy rate of 0.5 per cent. The BoC adjusted its forecasts to 1.1 per cent in 2016 and 2 per cent in 2017, downward from 1.3 per cent and 2.2 per cent, respectively.
In its Monetary Policy Report, the central bank predicted a major shift in the home building industry as developers might set their sights on constructing smaller homes, BNN reported.
The BoC also forecast a 0.3 per cent decline in real GDP by the end of 2018 as a result of the regulatory changes, with the economy getting back in shape only by the middle of that year.
Speaking to members of the press, Governor Stephen Poloz said that the BoC governing council raised the possibility of increasing monetary stimulus “in order to speed up the return of the economy to full capacity.”
“However, we identified a number of significant uncertainties... Importantly, the government’s actions to mitigate risks in the mortgage market were not seen as an impediment to easier monetary policy.”
Related stories:
New rules will pave the way for a less anxious BoC—analysts
BoC rate announced
