Residential Market Commentary - week of February 21, 2017

Feb 21, 2017, 14:54 PM by Joelle Park

It probably sounds more ominous than it really is, but the economic policies of the Trump administration do hang over the Canadian housing market.

Federal Reserve chair Janet Yellen has made it clear the U.S. central bank is keeping a very close eye on the White House for signs the administration is acting on Trump’s promises of steep tax cuts and sharp increases in government spending.  The key concern is inflation.

In recent testimony to the U.S. Congress Yellen said the Fed still expects to raise interest rates through 2017.  The Bank has been forecasting three increases this year.  Yellen still believes those increases can occur slowly but cautioned that waiting too long could force the Fed to respond rapidly which could disrupt the economy back into a recession.

Of course the Bank of Canada watches the U.S. Fed closely and rate changes in the States inevitably affect policy here.  If the U.S. continues with rate increases it could cool expectations of a rate cut here.