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The latest Financial System Review (FSR) suggests that the Bank of Canada’s concerns about high house price inflation are a key risk to our view that it will wait until early 2023 before raising interest rates. The FSR highlighted that, despite the fall …
21st May 2021
After being constrained for months by a lack of supply, vaccinations in Canada are now outpacing those in every other G20 nation. Nevertheless, the cautious approach by policymakers suggest that restrictions will still be in place for a while longer. …
14th May 2021
Home sales appear to have declined in April and further falls could act as a headwind to the recovery over the rest of the year. Sales plunged by a seasonally-adjusted 20% m/m in Toronto last month and by 7% in Vancouver, while they were unchanged in …
7th May 2021
During his appearance before the Standing Committee on Finance this week, Governor Tiff Macklem faced questions about why the Bank of Canada is still adding further stimulus through its QE purchases, even though inflation is set to spike to more than 3% …
30th April 2021
Reflecting the additional fiscal support confirmed in the 2021 Budget this week, the Bank of Canada has raised its GDP growth forecasts to be closer to our own. Nevertheless, we do not expect the Bank to raise its policy rate as soon as its new guidance …
23rd April 2021
We expect the government to unveil further stimulus measures worth a little more than 4% of GDP next week, and anticipate a slightly more dovish message from the Bank of Canada than markets are pricing in. Budget 2021 The government told us in its Fall …
16th April 2021
The proposal by the financial regulator OSFI, to raise the qualifying rate for uninsured mortgages, is unlikely to weigh on house prices. But by reducing the share of highly-leveraged borrowers, it should soothe the Bank of Canada’s growing concerns about …
9th April 2021
The data this week showed that the economy made a stronger start to the year than we previously thought, but the restrictions now being imposed to fight the third wave of the coronavirus suggest that growth will be slower than we anticipated in the second …
1st April 2021
Recent global developments and the signal this week from the Bank of Canada, that it is likely to cut its asset purchases sooner than we expected, lead us to think that Canadian bond yields will rise further this year. In contrast to our expectations a …
26th March 2021
While the government hinted this week that the vaccination program could be completed before the target of September, the threat of vaccine nationalism elsewhere means that, with Canada reliant on foreign production, efforts could still be derailed. …
19th March 2021
The Bank of Canada looks set to upgrade its GDP forecasts in April, but we would be surprised if it turned much more hawkish with regards to policy. The Bank delivered a reasonably upbeat statement alongside its decision to keep its policy rate at 0.25% …
12th March 2021
One of the most striking developments since the pandemic has been the surge in residential investment. The fourth-quarter national accounts, which this week showed a stronger-than-expected 9.7% annualised gain in GDP (see here ), also revealed that …
5th March 2021
The surge in yields this week occurred despite another signal from the Bank of Canada that it plans to keep interest rates at rock-bottom levels for a long time. This has led to suggestions that the Bank could engage in yield curve control, but we think …
26th February 2021
The government signalled its commitment to its new immigration target this week, but disruption from the pandemic will probably prevent immigration from picking up meaningfully until at least the end of 2021. It is not often that the bi-weekly Express …
19th February 2021
The housing market has largely shrugged off the latest phase of the coronavirus restrictions. If anything, the data imply there are upside risks to our already above-consensus forecasts for house prices this year. Admittedly, the 7.5% m/m drop in home …
12th February 2021
The larger-than-expected 213,000 fall in employment in January was disappointing, but we can take some comfort from the details of the Labour Force Survey, which showed that total hours worked continued to recover. The 0.9% m/m rise suggests there are …
5th February 2021
The government found itself battling on two fronts this week, as the EU moved to restrict vaccine exports and US President Joe Biden sought to strengthen ‘Buy American’ provisions at the expense of Canadian exporters. We do not think these moves seriously …
29th January 2021
The executive order signed by US President Joe Biden this week, to revoke the permit allowing the Keystone XL pipeline to cross the US border, means the project is as good as dead. This does not alter our forecasts for the next few years, but it …
22nd January 2021
The government confirmed this week that vaccine availability will remain limited in the first quarter, so there is little chance of the economic recovery beginning any sooner than we currently forecast. The government this week released a schedule of …
15th January 2021
Ontario and Quebec extended their coronavirus restrictions this week and, given that infections are still rising and logistical problems are holding up the vaccination process, it seems likely that further measures are to come. At the end of last year, …
8th January 2021
The provincial government in Quebec this week announced an 18-day “circuit breaker” lockdown, and the authorities in Ontario seem to be planning something similar. We assumed further measures were ahead, so this has not caused us to alter our forecasts, …
18th December 2020
The Canadian dollar jumped to a two-year high this week and, despite the pledge from the Bank of Canada that it will keep rates low across the yield curve, we think there is still scope for further gains. We have been more optimistic than most about the …
11th December 2020
Finance Minister Chrystia Freeland hinted this week that the government will continue to provide fiscal stimulus until the economy reaches full employment. This is a far cry from concerns elsewhere about public finances and reinforces our view that the …
4th December 2020
There is now more pressure on Finance Minister Chrystia Freeland to use the fall fiscal update next week to announce short-term measures to support the economy, but we still expect her to outline how the government intends to raise longer-term investment. …
27th November 2020
While renewed lockdowns could soon dent home sales, we doubt they would lower prices. There was a modest 0.6% m/m fall in home sales in October, but this was likely due to very low inventory rather than fears about worsening outbreaks of COVID-19. The …
20th November 2020
The increased likelihood that an effective vaccine will be rolled out next year could eventually lead to a situation in which Canada’s economy outperforms, but the swift U-turn this week on the easing of restrictions in Ontario, as well as the new …
13th November 2020
The easing of restrictions in Ontario and the stimulus announced in the province’s delayed 2020 budget bode well for activity, but the recovery could yet be upended by the further spread of the coronavirus. The announcement from Ontario Premier Doug Ford …
6th November 2020
Developments this week suggest it will take a much greater deterioration of the outlook for the Bank of Canada to deliver additional monetary support, leaving the onus on Finance Minister Chrystia Freeland to deliver further fiscal stimulus. The Bank was …
30th October 2020
There was plenty of data this week for the Bank of Canada to digest ahead of its meeting, yet none of this will have much bearing on the key question of how the second wave of COVID-19 will play out. The activity data for August showed only small rises in …
23rd October 2020
This week brought more news that the Canadian economy rebounded strongly as the lockdowns were eased over the summer. But the slowdown in employment growth in August is an early warning that the pace of recovery may be losing some momentum, at a time when …
4th September 2020
The government confirmed this week that former Senior Deputy Governor Tiff Macklem will take the helm from Governor Stephen Poloz in June. (See here .) We doubt the change will materially affect the way the Bank approaches monetary policy, but it is clear …
1st May 2020
We expect the Bank of Canada to leave its key policy rate unchanged next week, as fears of stoking the flames of the resurgent housing market outweigh the risk that economic growth will slow by more than expected this quarter. After peaking in early 2016, …
29th November 2019
The recent rebound in new home sales in Toronto is an encouraging sign that the local housing market is not about to emulate the sharp falls in prices in Vancouver. 4,794 new homes were sold in Toronto in May, up nearly 100% from the same month a year …
28th June 2019