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2005 Outlook: Signal vs. Noise.

Just a few short months ago, the Bank of Canada was raising rates in response to a surging economy and impending inflation concerns. However, when your dollar spikes 40% in value in the short span of two years and you're an export country, there are bound to be some consequences. These are the early signals;

Despite the apparent health of the economy this year, experts say trouble is brewing beneath the surface. That was becoming much more apparent by December. The Bank of Canada, which initially feared strong growth would trigger inflation, raised rates in September and October to 2.5 per cent. But by December, it suddenly noticed the dollar's drag on the economy and took a break from raising interest rates. Analysts now predict the central bank could leave its key policy rate at 2.5 per cent through the first half of 2005.

The noise on the street is resonating a calmer tone for the 2005 market as compared to the feverish pace we've seen in recent years. However, with the vital signs that drive the market continuing to look favourable to start the year, 2005 is shaping up to be another active year in residential real estate in the Lower Mainland.

December 29, 2004 in Money Matters | Permalink