• Citing a more muted inflation outlook and constructive evolution of imbalances in the household sector, the Bank of Canada stated that the withdrawal of monetary stimulus is less imminent than previously anticipated. That surprised markets, and interest rate expectations were ratcheted back and the Canadian dollar fell to a six-month low.

• Notably, the Bank highlighted how negative developments in Canada’s energy sector have left their mark on economic growth. In particular the lower prices Western Canadian producers are receiving for their crude.

• Slower-than-anticipated economic growth has translated into a very benign inflation backdrop, corroborated by December’s CPI report, which showed inflation in Q4 at a 12-year low. Weak inflation is in part due to heightened competitive pressures in the retail sector. These pressures are made more acute by a more modest consumer spending picture going forward.

United States

• A slow week for economic data saw two releases on U.S. home sales. Both existing and new home sales declined in December. However, with inventories at record or near-record lows, the outlook for construction and home prices remains bright.

• It was an eventful week on the political front with the inauguration of President Obama and the House of Representatives passing a bill extending the debt ceiling into May.

• A number of political risks remain on the horizon. What to do with the automatic spending cuts and how to avoid a government shutdown will keep policy makers busy over the next two months.

If you require guidance on current market trends, please call us, we are always available to help.

Today 5 year mortgage money is in the 2.98% range and 10 year mortgage money from 3.79%. Variable rates are as low as 2.65%.

-Cory Kline (Cory@ndlc.ca or 705-794-1283)

Mortgage Planning Since 1998

• The Bank of Canada’s Business Outlook Survey revealed that businesses are mildly optimistic about the future. Manufacturing sales also came in better than expected earlier this morning.

• The third Canadian data release for the week was the one that had everyone talking. Existing homes sales posted a 17.4% year-over-year drop in December – the largest drop registered since late-2010. Home prices eked out a gain, but momentum has undoubtedly decelerated over the course of the year.

• Tighter government-backed insured mortgage rules and stricter lending practices have contributed to the recent housing weakness. Looking ahead, we do not expect the Canadian housing market to undergo a U.S.-style crash. Instead, prices and sales should stabilize in the months ahead, but a gradual, medium-term adjustment remains in the cards.