Lending rates stay low despite “exuberant” housing market

March 18, 2021

Despite a sharp uptick in Canada’s employment rate and an “exuberant” housing market, the Bank of Canada (BoC) has no plans to increase its overnight lending rate from the current rock-bottom 0.25 per cent, according to BoC governor Tiff Macklem.
Statistics Canada reports 260,000 jobs were added in February 2021, pushing Canada’s unemployment rate down to 8.2 per cent—the lowest level since before pandemic lockdowns began in March 2020.
In a webinar statement February 23, Macklem was cautious on the employment outlook.
“As Canada achieves widespread vaccinations, we expect the economy to rebound, and many of these jobs will return. But we are not going back to the same economy we had before,” he said. “The economy will need support for quite some time, and the Bank will continue to do its part.”
And that means the low-interest rate environment will continue.
“We have committed to keeping our policy interest rate at the effective lower bound until economic slack is absorbed so that our inflation target is sustainably achieved,” according to Macklem.
Macklem also commented on growing signs of overheating in the country’s housing markets, but noted that while the BOC is watching the situation closely, the situation isn’t yet critical.
“We are starting to see some early signs of excess exuberance, but we’re a long way from where we were, say, in 2016, 2017 when things were really hot,” he said.