Pressures from global volatility and slow growth in the wake of the Brexit haven’t deterred the Bank of Canada from its current monetary policy; the central bank has opted to maintain the overnight lending rate at 0.5%. The Bank Rate is correspondingly 0.75%, and the Deposit Rate is .25%.

While it was widely expected that the BoC would hold status quo on rates, there was some speculation that a rate cut was in order due to Alberta’s massive forest fires and the resulting impact on oil production. Flames forced many oil sands projects to shutter, cutting production by an estimated 40% – a gap of 1 – 2 million barrels per day – and costing GDP and estimated $985 million.

“In Canada, the quarterly pattern of growth has been uneven. Real GDP grew by 2.4% in the first quarter but is estimated to have contracted by 1% in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires,” states the BoC’s release. “A pick-up to 3 ½% is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray.”
While the BoC’s projections remain close to those presented in April’s Monetary Policy Report, it is reporting a revised forecast due to weaker business investment outlook, and a lower profile for exports as a result of weaker US investment spending.

Real GDP is expected to grow by 1.3% in 2016, 2.2% in 2017, and 2.1% in 2018, as the Liberals make good on their promise to amp up infrastructure spending and investment.

“The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions,” it states. “Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth.” 

The BoC adds that consumer spending will also get a boost from the Canada Child Benefit.

While the market volatility following the Brexit has led other nations’ central banks to loosen monetary policy, Poloz has stated that Canada’s lenders are resilient enough to withstand any fall out. However, it emphasizes hot housing markets are a main contributor to downside risks facing the economy.

“Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas. The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at ½%.”

Home prices across Canada are set to jump this year as interest rates are kept near record lows by economic uncertainty from the U.K. referendum to leave the European Union, according to brokerage Royal LePage.

The average house price will rise 12.4 percent from 2015 to C$563,000 ($434,000), the highest year-over-year forecast from a real estate firm since at least 2000, Royal LePage reported Wednesday. With turmoil from June’s Brexit decision filtering into Canada’s economy, homebuyers can expect  mortgage rates to stay low and steady demand to continue to push prices higher, said Phil Soper, the brokerage’s chief executive officer.

“Economic and social disruptions have rocked the world once again, introducing new risks and making it very likely that the Bank of Canada will leave interest rates as is for now,” Soper said in the report.
Price gains will be led by Toronto and Vancouver, the country’s hottest housing markets. The average price of a Vancouver property — including condominiums, two-story homes and bungalows — will surge 27 percent from last year to C$1.2 million, according to Royal LePage. Prices in Toronto are forecast to climb 14.9 percent to C$718,000. The only major city set to cool is Edmonton, sliding 1 percent to C$376,700.