There is no doubt the Canadian economy is resilient. The country has weathered a few storms since 2008, but still chugs on – somewhat flat at times, but never stagnant. Despite trade tensions, Canada’s economy looks to be weathering the tariff storm well, for now.
The inflation rate has been inching up and is now at 2.2%, still well within the Bank’s comfort zone. The focus of the Bank of Canada (BoC) is on stimulating the economy and keeping inflation in check. Maintaining low, stable and predictable inflation is key to fostering an environment where Canadians can prosper.
There are many factors that contribute to rising interest rates. Since the economy has been in recovery mode for a while, it makes some sense the BoC would start raising the rate, given a few economic indicators.
One indicator that points to a continued healthy economy is the job numbers. Without jobs, household budgets get tighter, consumer purchases slow down, manufacturers scramble to reduce inventory, which could lead to lay-offs, and bankruptcies rise. And job loss is also the leading cause of mortgage default.
In June, the economy added 31,800 positions. At the same time the unemployment rate rose to 6%, from 5.8% in May. Average hourly wage growth has maintained the same level as last month at 3.6%. These are good signs.
On the downside, the housing market has cooled a bit because of the new rules introduced this year, but the market also saw home sales jump 4.1% in June, a sign that the market may be stabilizing.
Many economists and industry experts agree that the worst is probably behind us, because of the increase in home sales, and also because of an uptick in housing starts. Currently, we have a combination of rising interest rates with new rules that may inhibit heated market conditions, but the market may see more balanced conditions.
If you have questions about interest rates or what is happening in the housing market, please don’t hesitate to contact me. This may be a good time to discuss your future plans, especially if you’re thinking of buying a new home, consolidating to pay off debt or renovating.
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