As you may have read - reports are beginning to surface that the Bank of Canada is considering raising interest rates from emergency lows - possibly as early as September. This is based on economic numbers Canada has produced nearing the end of the second quarter of this year. Of course this can change on a daily basis - depending on who is presenting their version of the recovery and the statistics they are disecting to come up with their theories. Whether government agencies, banking institutions or think tanks, one thing is for certain - nothing is for certain. I do remember one case in particular when the government made a big deal of job numbers increasing - only to state under a hushed breath - these "new" jobs were only temporary - all associated with the federal election held in May. But postive has to be acknowledged - if only for a fleeting moment.
For Canada it is impossible to distance ourselves from our closest neighbour - and biggest trading partner. We go as the United States goes - the largest economy in the world. Admittedly on the surface Canada seems to have survived the most drastic issues that the Americans continue to endure (real estate disaster) but take a look around at the number of commercial lease signs going up in the city and our unemployment rate fluctuating on seasonal cycles - we are not yet back to pre-collapse levels.
On the real estate front Vancouver was moving along very nicely up until the fall of 2008. The world shook, rattled and rolled - in what seemed a matter of days - as giants south of the border began to fall. There were a few of us that noticed the real estate market was beginning to show signs of cooling (balance) about 9 months before - as we had reached pricing levels that were simply beginning to out-pace income. True, foreign investment will always keep a market like Vancouver healthy - but in some cases - this investment was obliterating any chance for locals to buy in or near the downtown core. As it stands now with detached homes - the West Side, West Vancouver and areas in Richmond and Steveston - are living a sellers dream. Most are selling at list price and higher - the Mainland Chinese influence is back with a vengence. Rumors abound the Chinese government will start to tighten the reins as they see this investment money leave the country and the state of China's economy - is starting to show some cracks.
It is very hard to imagine the Bank of Canada raising interest rates in the near future. With the cost of fuel and food alone - raising the cost of borrowing will have most sitting back and spending less. Quite a roller coaster we are on - but we are not the only paying customers. Just yesterday the US Federal Reserve presented the following:
Federal Reserve Chairman Ben S. Bernanke said the “frustratingly slow” U.S. recovery warrants sustained monetary stimulus while predicting that growth will gain speed in the second half of the year.
“The economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed.” At the same time, the Fed “will take whatever actions are necessary to keep inflation well controlled,” he said.
Bernanke said consumer spending is being held back by an unemployment rate that rose to 9.1 percent last month, a drop in home values and tight credit. Growth is likely to pick up as fuel prices moderate and factory disruptions ease as Japanese parts suppliers recover from an earthquake and tsunami, he said. Stocks fell yesterday as some investors interpreted the comments as a signal that the Fed is unlikely to deploy a new round of bond purchases to bolster the economy.
The implication is not only will there be no change, but a third round of quantitative easing is not likely to come.”
“Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers,” Bernanke said. Bernanke has spurred growth by holding the main interest rate near zero since December 2008.
Seems growth is connected at the hip with interest rates. Reading between the lines - there is a long road ahead but good news is for the fortunate few - either contemplating their first purchase or those wishing to up or downsize their home - mortgage rates are nothing short of specatuclar in some cases. The only issue at the moment is a solid employment history that will have lenders welcoming you with open arms. But believe me - they will also be doing their homework. The wounds of 2008 are far from healed.