Prolonged trade war would dent Canadian housing recovery: BMO economist
“We were seeing clear signs of stability in the harder-hit regions – Ontario and British Columbia more recently,” he said. “Sales were stabilizing, if not picking up. Prices were starting to stabilize. But I think any hopes of a meaningful recovery could be on the back burner if the trade war continues to escalate.”
The BoC’s conundrum: are inflation or growth risks higher?
Bank of Canada governor Tiff Macklem highlighted continuing inflation risks in his Wednesday press conference, but while inflation concerns might normally support the case for a rate hike, Guatieri doesn’t see one happening in the months ahead.
That’s because the trade war also looks likely to negatively impact the growth outlook for Canada’s economy, meaning a possible trend toward lower interest rates in the long run.
“I think the bigger concern is that the trade war escalates, and that should tend to keep, if anything, downward pressure on longer-term interest rates,” Guatieri said. “But unfortunately, that will greatly weigh on homebuyer confidence and perhaps delay any recovery in the housing market – especially in Ontario and British Columbia.”
Macklem said the likely impact on inflation of Canadian counter-tariffs on the US will be “fairly modest” and said the ongoing crisis in the Middle East, which started when the US and Israel attacked Iran in late February, remained the bigger driver of inflation concerns.
