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Category: Beneficial Mortgage Broker Services

Information Regarding Rate Announcement

Given the events in the market lately, I thought you might appreciate an update on the Bank of Canada’s rate announcement this morning. As expected, it left rates unchanged at 4.50%. However there were three significant changes to its statement:

1. Most notable, the Bank removed the previous statement from the July 10th meeting of “Some modest further increase in the overnight rate may be required to bring inflation back to the target over the medium term.”

2. It also added: “recent developments in financial markets have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand.”

3. The bank ended the statement with the following: “Against this background, the Bank judges that the current level of the target for the overnight rate is appropriate. However, there are significant upside and downside risks to the outlook for inflation. On the upside, there is a possibility that household demand in Canada could be stronger than anticipated, while on the downside the ongoing adjustment in the U.S. housing sector could be more severe and spill over to the U.S. economy more broadly. In addition, there is uncertainty about the extent and duration of the tightening of credit conditions in Canada and, hence, about the tempering effect this will have on growth in domestic demand.”

In a nutshell, what the Bank has done is left itself with tremendous flexibility. Still watching inflation for upside risks, but well aware of the fallout of credit and possible further implications on the real side of the economy. For now, the end result remains similar to before the meeting.

You should feel comfortable informing you mortgage clients that, from a rate perspective, we are in a “holding pattern” for now until more information surfaces.

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