In case you missed it, the Bank of Canada governor (Stephen Poloz) was in Vancouver last week to discuss a possible change in what the bank call its “overnight interest rate” and the implication of a change on housing markets.
It was clear that the Vancouver and Toronto markets are, well, unique and so is their impact should there be a rate change.
“We see the implications for certain housing markets as kind of a side effect of that primary mission,” he told Business In Vancouver’s Tyler Orton. “So it can play a role at the margin, it can play a role if there’s a consistency between what may be desirable for those housing markets’ point of view and the macro question that we face.”
Translation: a rate hike could cool the big city markets; a rate cut could reignite them.
As for the “macro question”…According to the Bank of Canada, its mandate is to stabilize the macroeconomy while achieving its inflation targets — it considers household debt that results from strong housing activity to be the country’s “biggest financial system vulnerability.”
If it sounds like walking a financial tightrope, it probably is.
Other comments by the Bank of Canada governor (and they’re also quite interesting) can be found at Business In Vancouver’s website, in Tyler Orton’s report.