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McLeans musing for May 2

Blog by Nick Swinburne | May 2nd, 2013

The European Central Bank cut its main rate by 0.25% today in an effort to provide additional stimulus to the troubled European economy.    This should cause the Euro to weaken slightly against other currencies which will assist exports by making European products less expensive.   However, most analysts consider this move to be too little, too late.    Banks in Europe already have substantial access to very low cost loans but there is minimal demand for loans at this time so this rate cut will be of minimal benefit.

In the US, the Federal Reserve has stated that it will keep rates low and continue the existing bond-buying stimulus measures as long as needed.   With the markets showing concern over weaker than expected spring numbers, this news should encourage markets that the Federal Reserve is committed to ensuring job creation and economic growth reach sustainable levels.   This will definitely be beneficial to Canada as the US is the largest purchaser of our exports.

In Japan, efforts by the central bank to stimulate the world’s fourth largest economy seem to be gaining momentum.   A plan to double the money supply is causing the yen to drop against other currencies, the stock market to gain momentum and consumer confidence to rise.  The goal of 2% inflation in the next few years now seems possible and would be a dramatic change to the decades of economic malaise that Japan has suffered.

The Canadian dollar almost reached parity this week as GDP numbers for February were higher than expected.  Although the Canadian economy is still in need of some stimulus, the positive GDP news, along with increased trade surplus figures, provide hope that the economy is moving in the right direction.

Canadian bond yields continue to creep downwards which  is consistent with the projection that fixed-term mortgage rates should remain at historic lows for the short to medium term.

Please remember that 80% financing is available for qualified US residents at great rates!



Jason McLean   BSc, AMP
The Mortgage Centre: Garibaldi Mortgage
fax: 604-905-3801
cell:  604-935-9190