The governor of the Bank of Canada gave a speech in New York Tuesday in which he highlighted the weakness in the global growth outlook and how lower interest rates are likely to be the new normal. Stephen Poloz ruled out a further cut in Canada’s interest rates though, unless there is a “shock of some significance.” While the governor’s words were uncomfortable for investors – pension funds were specifically warned to expect lower rates for some time – it is clearly good news for mortgage rates.

Global trade has reached a new “balance point” where it will contribute less to international growth than it did over the two decades before the financial crisis, Bank of Canada Governor Stephen Poloz said today in New York.

The surge in global trade that occurred before the financial crisis was a historical exception, Poloz said in a speech to Canadian and U.S. securities industry associations, reflecting a pace of globalization that won’t be replicated. While slower trade will reduce the global economy’s ability to grow, it isn’t necessarily a sign of underlying deterioration, he said.

“The weakness in trade we’ve seen is not a warning of an impending recession,” Poloz said. “I believe that the most important factor behind the slowdown in trade growth is that the big opportunities for increased international integration have been largely exploited.”

The comments reflect recent warnings by Bank of Canada officials that the Canadian economy’s long-term capacity to grow is slowing beyond short-term cyclical factors such as declining oil prices. Those forces — which are driving down long-term interest rates — reflect a complex list of things such as an aging workforce and slowing global trade.

“My argument is that a significant part of the strong productivity performance in the two decades before the crisis was due to globalization, and that the globalization process may have brought trade in the global economy to a new balancing point,” Poloz said.

 Poloz also said investors shouldn’t presume monetary policy is no longer effective.

“One worry I hear a lot these days hits pretty close to home — the idea that monetary policy just isn’t working anymore,” Poloz said.

“That’s one myth I’d like to dispel right off the top,” he said. “The fact is that policy actions — both monetary and fiscal — taken in the wake of the global financial crisis prevented what would have been a second Great Depression.

An increase in interest rates to 3 percent or 4 percent would trigger a recession, he said.

There are reasons to still be optimistic on trade, he said. Part of the slowdown is cyclical, reflecting falling business investment, and trade should pick up as the world economy begins to gain traction. There are signs that companies and investors are finding ways to “improve the efficiency of supply chains in many geographic areas.” There is also room for policy makers to nudge the global integration process forward even if the big gains to trade have already been exploited.

“For policy makers, of course, this means we should be working to help initiatives such as Trans-Pacific Partnership and the Comprehensive Economic and Trade Agreement between Canada and the European Union become a reality,” Poloz said.

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“The really interesting thing about this report is the insight it provides into foreign ownership of condominiums in Canada by age of structure. For example, in the downtown core of Toronto, we know that, in buildings completed since 2010, about 10 per cent of those units are owned by foreign buyers,” Bob Dugan, chief economist, Canada Mortgage and Housing Corporation, said. “This compares to about 2.3 percent for units completed during the 1990s. This represented another piece in the puzzle of foreign investment in Canada. It remains a top priority for CMHC to continue to get more information on foreign investment in Canada’s Housing market.”

The report found that foreign ownership is most prevalent in new condo buildings in Toronto and Vancouver.

In Toronto about 10% of newer buildings (built after 2010), compared to 2% of those buildings built in the 1990s.

A similar trend was found in Vancouver, where 6% of units in newer buildings are believed to be foreign-owned.

Highlights from the report include;

•In the Toronto CMA, the share of foreign ownership is less than 2% for buildings completed before 1990 and 7% for newer constructions completed since 2010. This effect is even more pronounced in Toronto Centre where about 10% of the newer stock is owned by foreigners.

•In the Vancouver CMA, foreign buyers’ share rises from less than 2% for properties built before 1990 to about 6% for those completed since 2010.

The stats were pulled from a fall 2015 survey.

CMHC admits the data isn’t perfect.

“At this time, no existing tool can provide a definitive measure of the level of foreign investment in Canada’s housing markets,” it said in a release. “That said, CMHC regularly engages in discussions internally, as well as with industry experts, as part of its continued efforts to develop a program of work that would better capture data on foreign buyers.”

There was no shock decision today as the Federal Reserve made its interest rate announcement.

During its March release, the Fed announced that it would maintain its benchmark interest rate in the range of 0.25-0.5 per cent. It had moved rates to this level back in December – the first increase for close to a decade – in what was seen as a sign of confidence in a resurgent US economy.

However, a difficult start to the year appears to have put plans for four further hikes during 2016 on hold with the Fed now predicting two rate hikes later in the year.

While investors had initially expected rates to rise this month, the path of the financial markets has taken things in a different path. With the US dollar remaining strong, weight has been placed on the US export market while the cost of imports has been held down. In addition, oil prices have reached their lowest point for around a decade which has placed further restraints on inflation.

Speaking ahead of the announcement, Kevin Logan, a chief economist for HSBC, told the Washington Post that the Fed was likely to “extend its current period of ‘watchful waiting’.”

Meanwhile, Eric Stein, co-director of global income at Eaton Vance, spoke to USA Today, telling the publication that rates were not going to go up this month but that several rate hikes are still likely later this year. He believes that the factors that may have scared the Federal Reserve earlier this year – including fears about recession, volatility within the credit markets and market turbulence – have calmed: perhaps giving more confidence to the Fed to continue with plans for a hiking cycle.

Among the clues that a future rate hike may still be coming include the fact that Wall Street had removed its predictions of rate hikes earlier in the year, but it is now predicting one-two during 2016.

 The Central bank has released its latest rate decision.

The Bank of Canada said Wednesday it will maintain its target for the overnight rate at ½%.

“The global economy is progressing largely as the Bank anticipated in its January Monetary Policy Report. Financial market volatility, reflecting heightened concerns about economic momentum, appears to be abating,” the bank said in a release. “Although downside risks remain, the Bank still expects global growth to strengthen this year and next. Recent data indicate that the U.S. expansion remains broadly on track.

“At the same time, the low level of oil prices will continue to dampen growth in Canada and other energy-producing countries.”

The BoC also noted recent rebounds in oil and other commodities. Coupled with slight appreciation for the loonie, the central bank said economic conditions are evolving as assumed in its January policy report.

“Canada’s GDP growth in the fourth quarter was not as weak as expected, but the near-term outlook for the economy remains broadly the same as in January,” the bank said. “National employment has held up despite job losses in resource-intensive regions, and household spending continues to underpin domestic demand. Non-energy exports are gathering momentum, particularly in sectors that are sensitive to exchange rate movements.

“However, overall business investment remains very weak due to retrenchment in the resource sector.”

Overall, the bank said risks are balanced.

“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 1/2 per cent,” the BoC said.

CMHC tells MortgageBrokerNews.ca what it plans to do once it collects additional foreign ownership data.

Many have applauded the Crown Corporation’s initiative to collect more comprehensive data on offshore buyers of real estate, which would help determine just how much influence they have on the market, but many have questioned what it plans to do with the data. Now we know.

“CMHC provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions,” Karine LeBlanc, a spokesperson for CMHC, wrote in an email to MortgageBrokerNews.ca. “Reliable data collected on foreign owners will be published to support informed decision-making.”

Perhaps not the answer brokers were looking for.

Many have called for stricter guidelines for foreign buyers, and hoped that further data would help kick-start those initiatives from the government.

However, that still may be the case. More comprehensive CMHC data could help kick-start changes from policy makers. Only time will tell, however.

On Monday, it was reported the Crown Corporation has been working with various agencies – including FINTRAC and Stats Canada – to better track foreign influence on the housing market.

“At this time, no existing tool can provide a definitive measure of the level of foreign investment in Canada’s housing markets,” LeBlanc said in an e-mail to Bloomberg on Friday. “That said, CMHC regularly engages in discussions internally, as well as with industry experts, as part of its continued efforts to develop a program of work that would better capture data on foreign buyers.”

Prices in Toronto and Vancouver – two cities thought to be heavily invested in buy wealthy offshore investors – have seen on seemingly unstoppable price gains.

The average detached home in Vancouver spiked 27% year-over-year to $1.3 million in February. The average price in Toronto, meanwhile, jumped to $1.21 million.

Today’s stronger than expected fourth quarter GDP figure of 0.8% annualized growth did little to assuage concerns that the Canadian economy is growing well below potential. Many expected growth to be flat in the final quarter of last year. The growth figure released today by Statistics Canada was boosted by the biggest drop in imports in six years—the direct result of surging import prices owing to the weak loonie and the fact that Canadians are traveling less outside the country. This is hardly something to cheer about, although it does take pressure off the Bank of Canada to cut interest rates further.

Final domestic demand – GDP less net exports and inventories – actually declined in the period between October and December, reflecting big reductions in business investment, particularly in non-residential construction. Business investment declined at a 6.8% annual rate, its fourth consecutive decline. Spending for non-residential construction and machinery and equipment – key contributors to productivity growth – plunged at a whopping 13.2% annual rate, largely in the energy and mining sectors. Consumer spending growth slowed as well relative to the prior quarter.

Housing was the one bright spot in the economy, although new housing construction slowed. The growth was attributable to the continued strength in the resale market (mainly in Vancouver and Toronto), as well as housing renovations.

Export growth was very disappointing. It had been an important contributor to the growth earlier in the year. Exports of goods decreased at a 2.0% annual rate, mostly because of the decline in sales of aircraft and other transportation equipment and parts (think Bombardier).

For the year as a whole, 2015 was pretty dismal. The economy advanced only 1.2% – not nearly enough to assure adequate job creation. This was half the pace posted in 2014. Canada’s terms of trade – the price of exports relative to the price of imports – declined sharply, reflecting the sharp drop in oil prices and the surging price of imports.

Given the latest round of spending cuts and layoffs in the oil patch, first quarter growth this year is likely to be quite tepid. The recovery in manufacturing is disappointingly slow and consumer spending is dampened by rising unemployment and record-high debt levels.

Fiscal stimulus is no doubt coming to mitigate the damage of the commodity price plunge. The March 22 budget will likely increase the federal deficit to at least $30 billion, triple the Liberal Party pledge during the election campaign. The Bank of Canada meets again next Wednesday, but is unlikely to cut rates further, leaving the feds to take the lead. The Bank held off in January as well, concerned that the rise in import prices would boost inflation and hoping fiscal stimulus would come to the rescue. All eyes will be on Ottawa later this month as continued depressed growth weakens consumer and business confidence.

In the wake of Finance Minister Bill Morneau’s economic update on Monday (February 22), economists remained upbeat of Canada’s prospects in the long run, despite a projected $18.4-billion shortfall this year (and another $15.5 billion next year) that has grown even before the implementation of the government’s spending plans.

“Even with such deficits, the debt-to-GDP ratio should remain low relative to other OECD economies. In our view the government has the flexibility to provide fiscal stimulus to a Canadian economy that badly needs it,” National Bank Financial senior economist Marc Pinsonneault told The Globe and Mail.

Pinsonneault said that such a move at this time “should hardly scare off foreign investors.”

BMO Nesbitt Burns chief economist Douglas Porter and senior economist Robert Kavcic concurred with this observation, saying that Ottawa can apply a moderate fiscal boost without inflicting lasting damage on its long-term debt outlook.

“The federal debt-to-GDP ratio has dipped in each of the past two years, and remains relatively low at 31 per cent. Additionally, total government debt (including other layers of government) remains comfortably below levels that prevailed during the mid-1990s when Canada’s credit rating fell under pressure,” the duo said in a report.

Porter and Kavcic added that this optimism needs to be tempered by reasonable caution, though, as an estimated $25-billion-plus every year deficit might prove to be a daunting opponent for the planned Liberal stimulus.

The shortfall has prompted various quarters to call on the Liberal government to aggressively go beyond its campaign promises. However, CIBC World Markets chief economist Avery Shenfeld assured that the 2016-2017 deficit is “hardly a blow-up,” as it would be only about 1.5 per cent of GDP.

“The only question is whether the modest dose of stimulus pledged in the campaign (roughly a half-per-cent of GDP) is enough to counter the drag on the economy from low commodity prices,” Shenfeld said.

The federal finance minister will report on the state of Canada’s economy Monday, an unusual step with the budget not far away. Bill Morneau will explain how much the economy has changed since the government set out its fiscal plans in November; oil prices have fallen further, global growth has slowed, the US dollar has strengthened and equities have dropped in the three months since.

With economists including the OECD downgrading Canada’s growth outlook for 2016, the minister is likely to focus on spending plans, especially in infrastructure, softening the blow of an increasing deficit, and rising household debt and house prices.