The sizzling real estate market is our focus again on BNN as Bank of Canada governor Stephen Poloz, the man with a big say in borrowing costs, gets set to release economic projections and the central bank’s latest interest rate decision.
No rate increase is expected but economists have been belabouring the monetary overseer to at least try to jawbone away some home-buyers’ optimism.
“The sustained period of extremely low rates is the root cause of the fiery market,” say BMO Capital Markets economists led by Doug Porter. “The Bank often states that it is not the first line of defence against excesses in housing; true, but they are a line of defence, and they can’t simply abrogate their responsibility to ensure that bubbles don’t emerge.”
Greg Bonnell will go one-on-one with Poloz to discuss today's decision. Watch it on BNN at 3 p.m. ET
The bank’s announcement is set for 10 a.m. ET and the news conference will begin at 11:15 a.m. ET. At noon, we’ll be joined by Conference Board of Canada chief economist Craig Alexander and mortgage-watcher Rob McLister, founder of RateSpy.com.
McLister argues that outside the cauldrons of Toronto and Vancouver, “nationwide, overvaluation is not a problem, with prices up only 3.5% year over year.”
However, he says headlines that blare warnings about a crash have politicians “running like scared mice.” He argues that the federal government still has plenty of options, including tighter down payment requirements, to restrain the market.
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Regional disparities complicate the choices facing Poloz. As BNN managing Noah Zivitz editor puts it, the choices are “Raise rates = shock the market. Dovish hold = give consumers the green light to pile on more debt. Hawkish hold = put consumers on notice.”
But economics aren’t the true driver of runaway markets. Guest host Gordon Reid told us this morning that “Momentum-type markets tend not to move on fundamentals. Momentum markets change on psychology. The thing that is going to change runaway real estate markets is the same thing that will change runaway equity prices – a belief that the next trade is going to be down.”
The other big story we’re tracking is jitters among cannabis investors are they prepare for tomorrow’s expected unveiling of Ottawa’s proposed legislation to legalize recreational marijuana.
Stocks in the sector slid yesterday amid fears of pot oversupply. The Globe and Mail reported that “the federal government is getting ready to drastically speed up its licensing process” for producers. “As Ottawa works toward squeezing out illegal producers of marijuana, federal officials are worried that a shortage of cannabis would hurt their plans in the initial stages of legalization.”
Tomorrow on BNN, we’ve lined up Cam Battley, executive vice-president at Aurora Cannabis (ACB.V), for 11:05 a.m. ET and Canopy Growth (WEED.TO) CEO Bruce Linton for 12:20 p.m. ET.
Every morning Commodities host Andrew Bell writes a ‘chase note’ to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnn.ca/subscribe.