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Ottawa - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
The outlook for the global economy has deteriorated and uncertainty has increased since the Bank released its October Monetary Policy Report (MPR). The sovereign debt crisis in Europe has intensified, conditions in international financial markets have tightened and risk aversion has risen. The recession in Europe is now expected to be deeper and longer than the Bank had anticipated in October. The Bank continues to assume that European authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. In the United States, while the rebound in real GDP during the second half of 2011 was stronger than anticipated, the Bank expects the U.S. recovery will proceed at a more modest pace going forward, owing to ongoing household deleveraging, fiscal consolidation and the spillovers from Europe.
MARVIN ZAYAC - MyMortgage.ca
Canadian housing bubble still looms
Though home sales are slowing, prices in six of Canada's largest housing markets are in bubble territory.
Home prices are sitting at 4.7 to 11.3 times Canadians' annual income - much higher than historical comfort levels of between three and four times income, according to a report by the Canadian Centre for Policy Alternatives (CCPA). The report defines a bubble occurring when housing prices increase more rapidly than inflation, household incomes and economic growth.
"To see all of the major markets outside of that comfort zone is very unique and concerning," said David Macdonald, a research associate who wrote the report called "Canada's Housing Bubble: An Accident Waiting To Happen."
Sales have fallen by 25 per cent since reaching its peak at the begnning of the year. But canadian home prices were up 13.6 per cent in June from a year ago in Canada's major cities.
"The concern today is all six major markets, not just Vancouver and Toronto, are out of that comfort zone," said Macdonald, including Calgary, Edmonton, Ottawa and Montreal. "All six major markets now have an average price of over $300,000."
***The CCPA is an independent, non-partisan research institute concerned with issues of social and economic justice.
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