The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. In addition, the Bank is continuing its quantitative easing program, committing to large-scale asset purchases of at least $5 billion per week of Government of Canada bonds along with continued purchases of provincial and corporate bonds. In the statement accompanying the decision, the Bank noted that the economic outlook remains extremely uncertain, but global economic activity is picking up. Financial conditions have improved, oil prices have rebounded, and pent-up demand in the Canadian economy has lead to a bounce in output and employment. The Bank expects that the Canadian economy will contract close to 8 per cent this year, but will build momentum into the second half of this year, leading to the economy growing 5.1 per cent in 2021. The Bank further noted that the economy will require extraordinary monetary policy support and the Bank will hold its policy rate at its effective lower bound until slack in the economy is absorbed and inflation has returned to its 2 per cent target.
Like the Bank, BCREA is projecting that the Canadian, and BC economy will start to recover in the third quarter. Positive signs of recovery are emerging in the housing market, with sales in BC recovering their pre-COVID-19 level in June. With the Bank committing to holding its policy rate at 25 basis points until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time, providing a significant boost to the BC housing market.
Copyright British Columbia Real Estate Association. Reprinted with permission.