3 February 2014

IMF also showed concerns about economic growth remaining too reliant on consumer spending and housing construction. In the same time, it believes exports and business investment will become main drivers of growth during the next few years.

In IMF’s opinion, the BoC will start raising its key lending rate early in 2015, and by 2019 it will reach 4%. It should be noted that analysts in a Reuters poll conducted before the latest bank’s meeting predicted the first rate hike in the second quarter of the next year.

As you know, the Bank of Canada has kept its overnight rate at 1% since September 2010. Nevertheless, last month it underlined the danger of extremely low inflation, making some market players bet more on a potential rate cut in 2014.

Although the IMF sees a cooling trend in the real estate market and household debt level, it still said the problem could appear once more in case the BoC changes policy.

IMF noted the average house prices in Canada remained overvalued by as much as 10%. In comparison to the historical averages and other advanced countries, home prices were high relative to income and rents.