Homeowners and first-time home buyers tracking Canadian mortgage rates in order to make their purchase or refinancing decisions continue to get mixed forecasts as to whether the Bank of Canada will raise its lending rate to 1.0 percent in September, as most analysts had predicted earlier in the summer.
Bloomberg News reports that, “(t)he odds of [Canada’s central] bank raising its policy rate to 1 percent has fallen to 48 percent from as high as 76 percent earlier this month, according to a Credit Suisse Group AG calculation derived from overnight index swaps.”
As Bloomberg notes, the Bank of Canada is the only central bank in the G7 to raise interest rates so far this year. This, despite some concerns that Canada’s overall economic recovery is still sluggish. Reporting new data on corporate spending – a key driver of overall economic growth – Bloomberg reports that corporate spending outside of Canada’s large and growing resource sector is somewhat “lagging.”
Bank of Canada policy makers meet on September 8 to determine whether to raise interest rates for a third time since June 1. The odds of the bank “raising its policy rate to 1 percent has fallen to 48 percent from as high as 76 percent earlier this month, according to a Credit Suisse Group AG calculation derived from overnight index swaps.” “While overall corporate investment for Toronto-listed stocks was up 28 percent in the latest quarterly filings, the fastest pace since the fourth quarter of 2007,” according to Bloomberg’s report, “spending excluding commodity producers was up 3.4 percent.”
While non-resource corporate spending may seem to be somewhat modest, it is far better than that in some other G7 economies (particularly in the U.S.), and is an encouraging sign in respect of overall growth. Bloomberg notes that, “(c)hanges in the pace of capital expenditure for listed companies have foreshadowed changes in business investment growth 62 percent of the time since 2005.” That is good news for the prospect of further growth, particularly since Bloomberg also reports that, “the increase in capital spending by oil and gas companies is the fastest since the first quarter of 2003.”
So far as this data is likely to affect overall Canadian mortgage rates, it is important to note that the Bank of Canada “predicted in its July 22 Monetary Policy Report that business investment will contribute 0.1 percentage point to its projection of 3.5 percent growth in 2010, and 0.7 percentage point to next year’s 2.9 percent expansion.”
With analysts seemingly split 50-50 as to whether the Bank of Canada will again bump its market-setting interest rate to 1.0 percent on September 8, it is seeming more and more likely – particularly with a sputtering U.S. economy – that Canada’s central bankers may take a pass on a rate hike for now in order to keep the Canadian recovery on track.
