The Bank of Canada Should “Cease and Desist”
“Beneath the symbol
We’ll all assemble
Oh how we’ll fly
Oh how we’ll tremble”
— Captain Beefheart, “Ice Cream for Crow”
If interest rates are the symbol beneath of which we all assemble, then there are some bad times ahead.
But Canada’s “leading economists,” say interest rates are “too blunt a tool” to cool the housing market.
Tomorrow the Bank of Canada will deliver a rate decision and an accompanying monetary policy report. Governor Stephen Poloz isn’t expected to raise rates anytime soon, but he’ll likely face some tough questions about the connection between low rates and the “hot” housing market.
Of course, he deserves every hard question thrown at him. And it’s nice that journalists are actually starting to question the obvious connection between low-interest rates and the housing bubble.
With Canadians across the country locked out of their local housing markets, and with foreign buyers using Canadian property to protect their wealth from destructive communist dictatorships, frustration needs an outlet and it looks as if Poloz and the BoC are, finally, in the crosshairs.
But that doesn’t mean Poloz will listen. After all, the central bank is supposed to remain “independent” from democratic government and popular opinion. Poloz is making his decisions based on his misunderstanding of the economy, not the will of the mob.
As Avery Shenfeld, CIBC Capital Markets’ chief economist, told BNN in an email, “The Bank of Canada will likely stick to its view that house prices are best dealt with through macro-prudential policies particular to that market, with the interest rate setting used to steer the economy overall,
Meaning, let the banks and federal government deal with the issue. The BoC will do what it can, but it will not include raising rates.
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