Bank of Canada governor Stephen Poloz gave a speech at Western University yesterday but although he referred to the recent interest rate cut he was not giving any clues as to the next move. He said that we are in uncertain economic territory and that the recent 0.25 per cent cut was necessary to balance falling inflation with high household debt, with both at risk from the lower oil prices. The BoC will announce its decision on interest rates next week (Mar. 4) but Poloz did not give an indication on the current thinking; many economists are banking on a further 0.25 per cent cut.

The tighter lending restrictions introduced in 2012 may have had unfortunate consequences. The rules were viewed as an attempt to cool the Toronto and Vancouver markets but a report suggests that smaller cities have felt the impact. Cutting the maximum length of mortgage insurance amortization to 25 years from 30 has put off some first-time buyers resulting in a glut of unsold condos in cities such as Winnipeg, Montreal and Moncton. The Globe and Mail reports that in Quebec there was a boom in condo purchasing in the year preceding the tighter rules on mortgages with a third of buyers taking out loans with 30 year amortizations while in Montreal 40 per cent of buyers did so. Paul Cardinal, manager of market analysis for the Quebec Federation of Real Estate Boards says that the restrictions had a similar effect on the market as raising interest rates by one percentage point.

More experts are joining the voices calling for a further cut in interest rates when the Bank of Canada announces its decision next month. The bank’s senior deputy governor Carolyn Wilkins said yesterday that “the economy still has room to grow” and that the bank’s monetary policy will “support the needed adjustments.” She said that the economy needs to adjust to the lower oil prices and that the bank doesn’t want to do anything that could stifle that. The labour market is one of the main areas of concern, especially with lay-offs in the energy sector, along with output and Ms. Wilkins believes that the gaps will close over time. She says that low and stable inflation will help boost investment and prompt the creation of more jobs. The Bank of Montreal’s senior economist Benjamin Reitzes says that we should “Look for another rate cut in March, and don’t count out further easing.” The rate decision will be announced on Mar. 4