Mortgage Shopping?

HERE’S SOME IMPORTANT TIPS ON HOW TO DO IT RIGHT!

First: Ensure you’re working with an Accredited Mortgage Professional that understands the business of Mortgages. This is likely the largest financial transaction of your life and it’s too important to put into the hands of someone that cannot advise you properly on the loan process.

There are 4 simple questions I recommend you ask your lender or advisor.  If they cannot answer any one of these 4 questions properly, you should reconsider dealing with them.

1)    What are Mortgage interest rates based on? Since mortgages are our business, it is critically important to know the answer to this question to ensure you’re dealing with a professional that knows the business and can therefore guide you properly prior to commitment and post funding.

• The correct answer for fixed rate mortgages is Bond Market Yields mainly determine the price of the mortgage.
• For variable rate mortgages the Bank of Canada determines the rate by setting its rate which then determines the Prime rates Banks charge their customers (you).

1. 2.     What is the next Economic Report or event that could cause interest rates to move? This is important for you to know if you’re in a variable rate mortgage.  Any professional mortgage advisor should have this information at their fingertips.  With my services you’ll obtain a monthly Economic Forecast that details upcoming events that may impact your mortgage interest rate/or the rate you may consider locking into.

1. 3.     When the Bank of Canada meets & changes interest rates what impact does this have on my mortgage? If you’re in a variable rate mortgage this is important because the rate the Bank of Canada charges will determine the rate your Bank will charge you.   A variable rate mortgage fluctuates with Prime and typically the Prime rate is 1.75% -2% higher than the Bank of Canada rate. This impact is immediate and may impact your next mortgage payment.

1. 4.     Do you have access to Daily Bond quotes? If a lender or mortgage officer can’t explain Bonds or how the bond quotes determine the rate charged on your mortgage, or the rate you may want to lock into if you’re in a variable, you should be  concerned.

Be smart… ask the right questions…. Make sure you get the right answers before signing on the dotted line!!

Kristine Owram, The Canadian Press
The Canadian Press, 2010

As the loonie flirts with parity for the second time this year, Canadians are becoming increasingly familiar with the effects of a higher dollar and are finding creative ways to take advantage of it.

The Canadian dollar was ahead 0.18 of a cent at 99.7 cents US near midday Thursday, backing off a gain that briefly saw it pass parity with the greenback for the first time since April.

Earlier in the morning it traded as high as 100.14 cents US.

The loonie has been gaining traction on weakness in the U.S. dollar and strength in commodity prices. Since last reaching parity in April, the dollar has approached the psychological barrier several times, only to fall back.

A high dollar has become part of everyday life for Canadians, and people are learning to get the most out of it.

Tim Kropp owns a UPS store in Lewiston, N.Y., bordering the Niagara region of southern Ontario. He said the vast majority of his customers are Canadians who have discovered they can get good deals by ordering goods online from American stores and having them shipped to an American post office box.

Having a mailbox south of the border not only allows Canadians to save on shipping costs and possibly customs duties, but also lets them order items from American stores where they are often less expensive. That’s because as the loonie moves higher, price drops often don’t keep pace in Canada, making it cheaper for Canadians to go cross-border shopping.

“We get a lot of Canadians ordering from Amazon.com, and I asked them: ‘Don’t they have Amazon.ca?'” Kropp said.

“But they said you either can’t get the item or the price difference makes it worth it to drive down and pick it up.”

Book prices, which are determined at the time of publication, can appear out of date when compared to the value of the loonie, which fluctuates on a daily basis. This is why there can be such a big discrepancy between the U.S. and Canadian prices listed on a book jacket, even when the dollar is at par.

But it isn’t just books Kropp is seeing delivered to his store.

“I just had a customer from Toronto the other day. She bought a big popcorn machine and she said it was $1,300 cheaper (to order it from the States),” he said.

Of the 150 mailboxes in Kropp’s store, only two of them aren’t used by Canadians.

“It’s definitely a trend we’re seeing at all the UPS stores along the border,” he said, adding that he’s seen his Canadian customer base increase by about 50 per cent since the dollar began to creep higher.

“We contacted UPS about a location, what’s available, and their whole main reason of telling us Lewiston was available was because they knew, based on what the other store up in Niagara Falls is doing, that they needed another location just to handle the Canadian customers.”

Economists say the dollar could hover near parity for a while, as signals mount that the U.S. economy is going to remain weak.

The American dollar has been pressured by speculation that the U.S. government will start injecting more money into the economy to give it another boost.

The most recent appreciation in the loonie followed the release of minutes from a U.S. Federal Reserve meeting which suggested the American central bank will further ease conditions through buying Treasury bills — so-called quantitative easing.

Quantitative easing is a way for the central bank to inject more liquidity into the economy without lowering interest rates, which are already as low as they can go in the United States.

That suggests U.S. central bankers are worried about the slow pace of the U.S. recovery and want to provide more cash to help jump-start stronger growth.

A stronger loonie will make Canadian exports of everything from auto parts and furniture to newsprint and lumber more expensive for American customers. But it will also cut the cost of imported goods and make it cheaper to travel abroad.

TD Bank (TD-T74.940.100.13%) is revamping its mortgage program, making it easier for homeowners to tap into their equity and harder for them to switch to another lender when their mortgages come up for renewal.

At the heart of the overhaul is a switch to collateral-charge mortgages, which are similar to lines of credit. The bank is encouraging employees to approve customers at 125 per cent of a home’s actual value under certain circumstances, so the homeowner can easily borrow more money if their property increases in value.

Unlike traditional mortgages, the collateral mortgages are difficult to transfer from one lender to another, because they must be paid in full to be cancelled. That means if someone wants to change lenders, they need to renegotiate from scratch.

While other banks offer variations on the collateral mortgage, TD is the first to switch exclusively as of Oct. 18. Existing mortgages aren’t affected by the change.

The bank’s move comes as the housing market cools and fewer Canadians apply for mortgages. It’s an attempt to entice buyers who expect to tap into rising values and don’t plan to shop around for better rates in the future.

Competition for new business is intensifying; record low mortgage rates weren’t enough to stop a slowdown of new buyers in the market during the summer. Sales fell by more than 30 per cent in Toronto and Vancouver, sending lenders scrambling to secure new business with innovative products and even lower rates.

Bank of Montreal currently offers the least expensive five-year fixed term at 3.59 per cent, although only its best applicants are likely to qualify at the special rate. Bank of Nova Scotia offers its customers the ability to split mortgages into two or three different components, each with its own terms.

TD said its new offering will ensure customers don’t pay additional charges to tap into their rising equity, which it called “great news for both you and your customer” in an internal memo to its mortgage brokers.

“Customers may under many circumstances choose to register their collateral charge for more than the approved principal amount of the mortgage, up to 125 per cent of the property value,” the e-mail stated. “This will allow them to borrow additional funds in the future without having to re-register … eliminating any solicitor and in-house registration fees.”

A homeowner can’t simply call the bank and access the extra money they were approved for, however. The deal is dependent on values rising, and in each instance the bank said it would need to inspect the home.

“Part of our credit approval includes an assessment of the current value of the property – an appraisal of the property – to ensure the existing value can support the increased borrowing,” said spokesperson Kelly Hechler.

The move has sparked anger among the country’s independent mortgage brokers, who see the change as a direct shot at an industry that has been gaining market share from the big banks by competing fiercely on mortgage rates.

“Credit unions have always gone this route so it’s not like they are reinventing the wheel,” said Mike Averbach of Vancouver’s Averbach Mortgages. “People literally have to cash out if they want to change over, so it’s just another way for them to be handcuffed to the bank.”

Securing a rate hold is like having insurance on your mortgage rate – you no longer have to worry about mortgage rates increasing while you find your new home over the next 90-120 days. And if rates drop within that same period, so too will your pre-approved rate.

For instance, if you obtain a 3.75% rate hold and then global risks subside and the economy strongly recovers over the next three to four months, that 3.75% could easily jump to 4.50% or higher. In this case, your rate hold for 3.75% would have saved you three-quarters of a percentage point, which would translate to a savings of a significant amount of money over the term of your mortgage.

But a rate hold means nothing if you don’t meet the lender’s qualifications. By working with me to obtain a pre-approval and a rate hold, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property.

It’s important to note, however, that there is a significant difference between being pre-

                 approved and pre-qualified. In order to obtain a pre-approval, the lender fully underwrites the deal, whereas with a pre-qualification only the most basic details are considered. Remember that many banks will only issue a pre-qualification.

There are several reasons why you may want to secure a rate hold, including when you:

*             Are thinking of buying a home in the next four months

*             Are considering locking in your variable rate to a five-year fixed if rates rise, but your lender won’t hold a good rate for you

*             Are casually thinking of refinancing but prefer to wait for fixed rates to rise so that your interest rate differential (IRD) penalty falls

*             You want to hold a rate on a different term than you were pre-approved for by a different lender

As always, if you have any questions about rate holds, pre-approvals or your mortgage in general, I’m here to help!

Reuters

MBA Mortgage Applications —

The number of mortgage applications in the U.S. declined for a fifth straight week, led by a drop in refinancing despite mortgage rates dropping to a record low. The Mortgage Bankers Association’s index decreased 0.2% for the week ended Oct. 1. Refinancing fell to an eight-week low, while purchases increased by the most since April.

LONDON – The Bank of England left interest rates at 0.5% for a 20th consecutive month on Thursday and kept its asset-buying program on hold, but the outcome probably masked a vigorous debate about whether economic conditions require tighter or looser policy. The unchanged interest rate verdict was predicted by all 61 economists in a Reuters poll. Most economists expect rates to stay at 0.5% until well into 2011 and only around a third think the bank will extend its quantitative easing program — capped at 200 billion pounds in February — in the future.

Currency war could be latest threat to global recovery

By Julian Beltrame, The Canadian Press  OTTAWA — The prospect of “an international currency war” that could spill over into trade protectionism is adding a new threat to the global recovery, Canadian, U.S. and other officials warned Wednesday.

The issue appears to be coming to a head in advance of Friday’s finance meetings in Washington involving the G7 countries and the International Monetary Fund, with several major players demanding action.

“There is a danger here that countries that have currencies that trade freely are disadvantaged by certain interventions that are made by other countries, and by inflexibility by certain currencies,” federal Finance Minister Jim Flaherty told reporters.

“We don’t want these kinds of distortions in currency values or distortions in trading relations.”

Earlier in the day, U.S. Treasury Secretary Timothy Geithner was far blunter, calling out countries like China that have built a powerful export-based economy on what critics believe are artificially depressed currencies.

For example, a low yuan not only makes Chinese products more attractive in countries like the U.S. and Canada but also discourages imports from those countries while making their domestic manufacturers less competitive even in their own markets.

Geithner said countries with large trade surpluses must let their exchange rates rise or risk a dangerous game of chicken.

“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same,” he said.

He said the issue is so critical that the call by emerging countries for a bigger role at the IMF should be tied to their willingness to adopt more flexible exchange rates.

“I think Mr. Geithner has a point,” said Flaherty.

A form of tit-for-tat on exchange rates has already begun. Japan recently sold yen to cut its value, and Tuesday sliced its policy interest rate to zero, which will also have the effect of undermining the currency.

Brazil, which was one of the first raise the alarm over what it called a brewing “international currency war,” has doubled a tax on bonds purchased by foreign sources in an effort to rein in its strong currency.

Even the United States has been accused of using quantitative easing — printing money — to deflate the greenback.

The moves helped lift the Canadian dollar to a five-month high Wednesday as it once again threatens to reach parity with the U.S. dollar. In afternoon trading, the loonie briefly rose above 99 cents US before settling up 0.59 of a cent at 98.94 cents US.

“There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” IMF managing director Dominique Strauss-Kahn was quoted as saying Wednesday. “Translated into action, such an idea would represent a very serious risk to the global recovery.”

Bank of Montreal economist Douglas Porter believes the bigger danger may be in the rhetoric than the reality, particularly if countries like the U.S. trigger a far more punitive trade war.

In Washington, Congress is moving forward with legislation that would essentially impose duties on exports from China to compensate for the low yuan.

At the heart of the frustration is that one year out of recession, most advanced economies are still in first gear, and braking, while emerging countries are speeding ahead.

An IMF report issued in advance of Friday’s meetings highlighted the bi-polar world. It predicts growth in the developing world, led by China, will expand at a 7.1 per cent clip this year and 6.4 next, compared with 2.7 and 2.2 per cent among advanced economies.

The issue could get ugly in November when the G20, which includes countries like China and Brazil, meets in Seoul, South Korea, to finalized plans for financial system and economic reform.

Prior to the Toronto summit in June, China announced it was prepared to allow the yuan to appreciate slightly, but it barely moved. Since the U.S. threats of retaliation, it has appreciated about 1.7 per cent.

That will hardly appease critics, given that some place the undervaluation at as much as 40 per cent.

Flaherty said all countries had agreed to implement reforms at the Toronto summit in June, including fixing global imbalances, and now need to fulfil their promises.

“We have to make sure people stay on the right track,” he said. “The timing of this weekend’s meetings, once again, is prescient.”

By Sunny Freeman, The Canadian Press

TORONTO – Home sales rose in August on a monthly basis for the first time since March but prices remained flat — signs of health in Canada’s real estate market that should deflate fears of a housing bubble.

There were about 32,800 transactions in August, up 4.1 per cent from July on a seasonally adjusted basis, the Canadian Real Estate Association said in a report Wednesday.

However, the number of units sold was down 22 per cent from 42,350 units in August 2009.

“High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months,” Gregory Klump, CREA’s chief economist said in the report.

“This makes the return to more normal levels of sales activity look like a steep downward trend.”

Many potential buyers raced into the market while mortgage rates were at historic lows and before changes to mortgage qualification standards in April.

In addition, buyers in the hot housing markets of British Columbia and Ontario rushed to buy before the new harmonized sales tax, which applies to real estate services and some home purchases that had previously been exempt, took effect July 1.

In July, sales fell 30 per cent from the year before, when the strong housing market led Canada’s economy out of recession.

Sales have been falling steadily in recent months as demand moderates and more owners put their houses on the market. But until last month, home prices had continued to rise on a monthly basis, leading some economists to question whether the market could experience a sharp downturn.

The average price of homes sold through the Multiple Listing Service last month was $324,928, little changed from $324,843 in August 2009.

Douglas Porter, deputy chief economist at the Bank of Montreal (TSX: BMO.TO), said the flat year-over-year numbers suggest home prices have finally started to moderate in line with falling sales.

“Average home prices were officially unchanged from year-ago levels in August,” Porter wrote in a report, adding that “we still expect that average prices will post some modest year-on-year declines by the end of this year.”

Before the August numbers were announced, there had been some renewed debate amongst economists as to whether Canada’s housing market was teetering on the edge of a U.S.-style collapse as prices continued to rise even as sales fell.

That led some industry watchers to warn that home prices could be artificially inflated and might soon see a drastic downturn.

Klump said the hangover from accelerated home purchases earlier this year were likely to persist into 2011, but won’t push the market to the brink of crisis mode.

And Porter said a renewed slide in longer-term mortgage rates in recent weeks will help to offset a slow but steady increase in the Bank of Canada’s overnight interest rate, which climbed to one per cent last week, sending banks’ prime rates and variable rate mortgages higher.

“While home sales are still nursing a bit of a hangover from the real estate party in the first half of the year, it looks like conditions are stabilizing,” he said.

“Looking ahead, sales are expected to remain on the soggy side with consumer confidence dimming, but should find support in still-low rates and steady job growth.”

In another sign of housing market health, the number of new listings was more than double the number of sales, a clear indication the market is now considered balanced, Porter said.

As a result, it would take nearly seven months for all the listings to be sold at the current pace — a slight improvement from July but still relatively high.

Contrary to most economists’ expectations, did not signal a pause for its next decision in October

(Reuters)By Louise Egan

OTTAWA (Reuters) – The Bank of Canada raised its benchmark interest rate for a third consecutive time on Wednesday and sounded surprisingly hawkish despite predicting a more gradual than expected economic recovery.

The central bank nudged its overnight rate target up 25 basis points to 1 percent and, contrary to most economists’ expectations, did not signal a pause for its next decision in October. It said rates remained “exceptionally stimulative” but kept all options open due to doubts about the U.S. and global recoveries.

“Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” it said in a statement.

The Canadian dollar jumped to a session high against the U.S. currency, touching C$1.0369 to the U.S. dollar, or 96.44 U.S. cents from C$1.0486 to the U.S. dollar just before the announcement.

Short-term money market rates and bond yields also jumped. The yield on the rate sensitive two-year Canadian government bond rose to 1.377 percent from 1.266 percent just before the news.

“Generally it’s a very upbeat statement, it’s a little more hawkish than I anticipated,” said Derek Burleton, Deputy Chief Economist at TD Bank Financial Group. “This will cast some uncertainty about whether the bank will pause at the next fixed announcement date.”

The Bank of Canada has raced ahead of its Group of Seven peers in raising borrowing costs after the global financial crisis. It lifted its policy rate on June 1 from an all-time low of 0.25 percent and raised rates again on July 20.

The U.S. Federal Reserve, by contrast, has raised the prospect of further easing and counterparts in Europe and Japan are likewise far from ready to tighten monetary policy.

CLOSE CALL

Markets had seen Wednesday’s rate hike as a close call because of rising fears of another U.S. economic downturn. Twenty-five out of 41 forecasters in a Reuters poll had predicted a hike. Most analysts also expected the bank to hold rates steady in October and December and possibly longer as it tracks developments elsewhere.

After the rate announcement, markets were pricing in an about a 68 percent probability the bank would leaves rates unchanged in October based on yields on overnight index swaps, according to a Reuters calculation.

“As it stands right now, our official call was for the Bank to remain on hold for the next few meetings, but that’s obviously something we have to review in light of the statement and as economic figures roll in the weeks ahead,” said Doug Porter, deputy chief economist at BMO Capital Markets.

The Bank of Canada said the 1 percent rate is “consistent with achieving the 2 percent inflation target in an environment of significant excess supply in Canada.”

The language was similar to that used in its last rate announcement on July 20. But the bank omitted any reference to weighing any further rate hikes “against domestic and global economic developments.”

U.S. TO BLAME

It acknowledged that the economic recovery was losing slightly more steam than it had anticipated just six weeks ago. Second quarter growth disappointed at a 2 percent annual rate versus the bank’s 3 percent projection. The bank will revise its official forecasts next month.

It blamed the weaker economy in the United States, which buys three-quarters of Canadian exports, for the tepid rebound in Canada. High U.S. unemployment is holding back spending by individuals and businesses, it said.

While exporters may take a beating, the bank sounded upbeat on domestic consumer spending and business investment.

“Going forward, consumption growth is expected to remain solid and business investment to rise strongly,” it said.

Most recent U.S. data have dampened fears of a double-dip recession but the recovery there is still wobbly, making it uncertain whether the U.S. Federal Reserve will see fit to take further action to drive down already rock-bottom borrowing costs.

The European Central Bank kept euro zone rates at a record low of 1 percent for the 16th month running last week and extended its program offering liquidity to banks.

The Bank of Japan stood pat on monetary policy on Tuesday but set the stage for possible easing next month.

Canada’s commodity exporting economy has been more akin to that of Australia, which hiked rates 150 basis points between October and May but has since moved to the sidelines. http://ca.news.finance.yahoo.com/s/08092010/6/finance-bank-canada-hikes-rates-sees-slower-recovery.html

Live in Studio with Bill Good we discussed why variable rates are so attractive right now, and how important it is to understand the factors of what has been holding some individuals back from taking advantage of todays record lows.

Click here to see the 9 minute segment 

http://www.youtube.com/watch?v=x8mtvKRpePo

 What would you do with that additional savings? Call 604-802-3983 or introduce us over an email at acalla@dominionlending.ca to someone that you truly care about to see how we can help you today!

Hot off of the press of the Financial Post

Bank of Canada raises rates

Paul Vieira, Financial Post * Wednesday, Sept. 8, 2010

OTTAWA — The Bank of Canada raised its benchmark interest rate
Wednesday by 25 basis points to 1%, arguing financial conditions remain
“exceptionally stimulative” even in the face of a slowing — but still
growing — economy.

In its accompanying statement, the central bank acknowledged the
economic recovery in Canada would be “slightly more gradual” than
envisaged it its most-recent economic outlook, due to sluggish
private-sector demand in the United States. However, it said domestic
demand was expected to be “solid” and business investment to advance
“strongly” — powered by “accommodative” credit conditions that have
eased further in recent weeks due to sharp declines in bond yields.

Banks price loans, such as mortgages, based on yields for relatively
safe government debt.

The statement provided no suggestion the central bank was set to keep
rates on hold for an indefinite period, as some analysts now expect.

“As a result of monetary policy measures taken since April, financial
conditions in Canada have tightened modestly but remain exceptionally
stimulative,” the central bank said.

For instance, consumers continue to take out loans at a steady pace,
with central bank data suggesting household credit expanded at an
annualized 7.1% pace for the three-month period ended July 31.

The Bank of Canada said future hikes in its key lending rate, up 75
basis points in the past three months, “would need to be carefully
considered in light of the unusual uncertainty surrounding the outlook.”

This decision may come as a bit of a surprise for traders, who have been
largely divided as to which way Mark Carney, the central bank governor,
and his colleagues would lean toward in the face of slower than
anticipated economic growth. Markets had priced in a roughly 60% chance
of a rate hike, and those odds increased over the past week from a less
than 50-50 chance based on better-than-expected manufacturing and labour
data in the United States.

Canadian GDP expanded 2% annualized in the second quarter, well below
the central bank’s forecast of 3%. However, analysts have said the
economy was stronger than the headline print indicated, as final
domestic demand advanced at a robust pace (3.5%). Plus, much of the drag
in the second-quarter was from so-called “import leakage,” in which
gains in imports — as firms acquired productivity-enhancing equipment
at the fastest pace since 2005 — outstripped exports.

Of the GDP results, the Bank of Canada said economic activity “was
slightly softer” than expected, “although consumption and investment
have evolved largely as anticipated.”

The central bank is likely pleased at the turnaround in business
investment, which it has argued is required for the recovery to maintain
momentum once consumer spending tapers off. Plus, investment from firms
in productivity-enhancing technology is required to ensure future
growth.

The bank said the Canadian recovery would be “slightly more gradual than
it had projected in July … largely reflecting a weak profile for U.S.
activity.” The U.S. Federal Reserve has said it was prepared to take
further action if required to stoke the recovery, although officials at
the powerful central bank are unsure such measures are required.

The Bank of Canada said inflation — which the central bank aims through
rate decisions to hit and maintain a 2% level — has been “broadly in
line” with expectations and “its dynamics are essentially unchanged.”

In terms of the global picture, it said the recovery is proceeding “but
remains uneven, balancing strong activity in emerging market economies
with weak growth in some advanced countries.” As for the United States,
the world’s biggest economy and Canada’s biggest trading partner, the
central bank said the recovery in private demand is “being held back by
high unemployment and recent indicators suggest a more muted recovery in
the near term.”

Economists have scaled back growth expectations for both Canada and the
United States, although at the same time boosting the forecast for
Europe as its major economies are advancing better than expected
following the sovereign debt crisis in the spring.

The central bank is scheduled to provide an updated economic outlook
next month, two days following its next rate decision on Oct. 19.
Previously, the central bank had forecast 3.5% economic growth this
year, followed by 2.9% expansion in 2011. The output gap — a rough
measure of the amount of excess capacity in the economy — is expected
to close by the end of 2011.

For Immediate Realease:

Bank of Canada increases overnight rate target to 1 per cent

OTTAWA –The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is proceeding but remains uneven, balancing strong activity in emerging market economies with weak growth in some advanced economies. In the United States, the recovery in private demand is being held back by high unemployment and recent indicators suggest a more muted recovery in the near term.

Economic activity in Canada was slightly softer in the second quarter than the Bank had expected, although consumption and investment have evolved largely as anticipated.  Going forward, consumption growth is expected to remain solid and business investment to rise strongly. Both are being supported by accommodative credit conditions, which have eased in recent weeks mainly owing to sharp declines in global bond yields.

The Bank now expects the economic recovery in Canada to be slightly more gradual than it had projected in its July Monetary Policy Report (MPR), largely reflecting a weaker profile for U.S. activity. Inflation in Canada has been broadly in line with the Bank’s expectations and its dynamics are essentially unchanged.

Against this backdrop, the Bank decided to increase its target for the overnight rate to 1 per cent. As a result of monetary policy measures taken since April, financial conditions in Canada have tightened modestly but remain exceptionally stimulative. This is consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada.

Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.

Information note:
The next scheduled date for announcing the overnight rate target is 19 October 2010. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 20 October 2010.