Interest Rates, Up, Down or Sideways?
May 29th, 2007 by Marty
The Canadian economy has a different set of challenges to that of the United States. The housing market is not at risk of a steep correction and consumer spending is expected to remain supported by continued strength in the labour market. Even though home building activity will ease as the year unfolds, high renovation intentions will take up some of the slack, allowing overall residential construction to contribute modestly to GDP growth in 2007 and 2008.
Putting it all together, the economic challenges in Canada are more contained to the export oriented manufacturing sector rather than the domestic economy, raising the prospect that Canada will outperform its neighbor to the south, both in absolute terms of GDP growth and relative to potential GDP for each country. The Canadian economy is expected to expand by 2.4% in 2007 before returning to a 2.9% pace in 2008. It is for this reason that the central bank is unlikely to make any substantial cuts to interest rates this year.
Commentary by
Patrick Lofto
Manager, Residential Mortgages
TD Canada Trust
Tel: (416) 839-5286
Fax: 1 (866) 390-6105
Pager: 1 (866) 767-5446
