The Latest in Mortgage News: BoC Deputy Governor Says Rate Hikes Could Come Later Than Expected

  11/19/2021 |   SHARE
Posted in Mortgage Interest Rates by Bashar Mahfooth| Back to Main Blog Page

Bank Of Canada

Financial markets may be pricing in the first interest rate hikes as early as March, but they shouldn’t be too confident about that timing.

That was the message from Bank of Canada Deputy Governor Lawrence Schembri during a question and answer session following a speech on the labour market this week.

“There’s a lot of uncertainty about the timing of the closing of the output gap, so one should be careful not to assume it’s necessarily going to be the second quarter. It’s a range of six months—that’s our best estimate,” he said.

The Bank of Canada said last month that it expects economic slack to be absorbed in the middle quarters of 2022, which is when it anticipates the first move in the coming rate-hike cycle.

But labour market uncertainty is making it more difficult to pinpoint the timing of the first rate hike, Schembri argued.

“Our assessment of labour market conditions and underlying capacity and inflationary pressures is now more difficult,” he said. “Consequently, more uncertainty exists around the timing of when the output gap will close and inflation will return sustainably to our 2% target.”

Bank of Canada Governor Tiff Macklem sent a similar message this week in an opinion piece for the Financial Times. He noted that while the timing of the next rate hike is “getting closer,” it’s still very dependent on economic conditions.

“For the policy interest rate, our forward guidance has been clear that we will not raise interest rates until economic slack is absorbed,” he wrote. “We are not there yet, but we are getting closer.”

Source: Canadian Mortgage Trends

Bank of Canada, Bank of Canada Benchmark Rate, Home Buyers, Mortgage Consumers, Variable Rate Mortgages

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