BoC rate changes: Not what, but why

Source: Canadian Real Estate Wealth

by Jennifer Paterson 05 Mar 2015

Real estate experts were not surprised by the Bank of Canada’s announcement yesterday that it would maintain the interest rate at its current level – but some suggest that investors should not be making any buying or selling decisions based on the BoC’s movements.

“Rates are so low now that investors should never be making an investment decision based on whether the BoC raises or lowers its rate,” Don Campbell, a real estate investor, researcher, author and educator, told CREW. “They need to pay attention to the reasons why it happens.

“Let the consumers obsess about the rate – strategic investors obsess about the why. It is always in the ‘why’ where strategic investment decisions are made.”

Campbell advises investors to instead pay attention to the commentary that surrounds the interest rate.

“Right now, the Bank of Canada is saying their economic metrics are showing stability and that they are happy with the impact of their last rate cut, happy with the lower Canadian dollar, happy with how that buffers the lower oil price while providing incentives to exporters,” he adds.

Holding the key rate steady is a prudent move and not surprising given how the economy reacted to the surprise 25 basis point cut in January, says Shaadi Faris, vice president of Intergulf Development Group in Calgary.

“The lower Canadian dollar has spurred the manufacturing sector and served as a hedge against lower oil prices, exactly what the Bank of Canada intended.

“This means status quo for B.C. and Alberta,” he continued. “B.C. will continue to benefit from a cheaper dollar as exports prosper, while solving Alberta’s resource woes relies more on global supply and demand economics.

“The depressed dollar will continue to provide some relief as Alberta producers sell their product in U.S. dollars but pay their costs in Canadian.”

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Investment Hot Spots:
Tavistock, Ste. Anne du Ruisseau, Gravelbourg, Upper Clyde River, Winnipeg

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