Canada Mortgage Renewal Decisions Should Be Made Prior to July 15th

Consumers in Canada weighing their mortgage renewal options should be paying close attention to what rookie Bank of Canada Governor, Mark Carney has been saying about the Canadian economy and his concern that energy and commodity prices are putting inflationary pressure on Canada’s economy. On June 10^th, Mr. Carney surprised complacent industry analysts by not cutting the BofC’s main lending rate lower than its current 3.0% as most analysts had predicted. This surprise came despite Mr. Carney’s having publicly raised concerns
about inflationary pressures, adding his voice to those of other G7 central
bankers who had also expressed their concern about heightening inflation as the
result of energy and commodity price hikes.

Yesterday, Mr. Carney gave a detailed address on monetary
policy, inflation and the effects of rising energy and commodity prices to Calgary’s
Halkayne School of Business. It was Mr. Carney’s first major appearance since the BofC’s June 10^th rates decision that caught most industry analysts by surprise and set them back on
their heels.

In this most recent address, Mr. Carney emphasized – and re-emphasized – the fundamental importance of inflation to a central banker’s decisions on monetary policy. “At a fundamental level,” Mr. Carney remarked, “the primary goal of monetary policy should be to keep inflation low, stable, and predictable. While commodity-price shocks raise complex issues, a relentless focus on inflation clarifies policy decisions, makes communications easier, and maximizes the likelihood that expectations will remain well anchored.”

Having caught industry insiders by surprise once, Mr. Carney’s well-chosen words seem to be clearly intended to telegraph the message in a manner that not even the most myopic or overly optimistic analyst can misinterpret, that keeping a lid on inflation will be the Bank of Canada’s main priority so long as energy and commodity price gains keep pushing inflation to and past the 3% inflationary ceiling the Bank of Canada has modeled for in 2008.
Mr. Carney’s recent address makes it crystal clear that the inflationary pressure is on, or at least the sensitive skin of Canada’s central banker is feeling the flush of its heat. Energy and commodity prices have continued to soar since June 10^th. This makes it seem evermore likely that Mr. Carney will boost the Bank of Canada’s main rate on July 15^th when the Bank of Canada reconvenes to price its main lending rate. Look for a moderate increase in the BofC’s main rate at
that time – perhaps, 0.25%.

Homeowners in Canada pricing their mortgage renewal options would do well to speak a Canadian mortgage broker about their refinancing options before July 15^th.