CENTRAL BANKS MULL FURTHER RATE CUTS While investors’ assumptions about potential rates of inflation and economic growth—which, by the way, aren’t always correct—determine longer-term yields in the bond market, the same investors, and their assumptions, are heavily influenced by central banks, who set short-term rates as a matter of policy. In this country, the Bank of Canada is headed by Stephen Poloz. Lucky to be him, too: rare are the instances when the Bank of Canada governor generates as much interest with every rate announcement as he does now. While the Bank of Canada has held its trend- setting rate level at 1.75% since last October, our money is on one rate cut of 25 basis points by the end of year, with two cuts not being completely out of the question.
In the United States Jerome Powell, who heads the Federal Reserve (which sets short- term rates in that country), has cited trade policy uncertainty as a major headwind for both the US and the global economy, denting as it has consumer and business confidence and capital investment. That’s one of the reasons the Fed recently cut its rate by 25 basis, with most Fed-watchers betting on at least one more before year’s end. Should these cuts take place they will provide a boost not only to global and local economies but also to this region’s housing market, making ownership just a little more affordable.
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