Economic Forecast for August '06: "Just an Opinion"

Canada's lower inflation rate, nearly 2% lower, than the United States' economy is generating will allow the Bank of Canada to steer a lower course on interest rates. Much of the credit to the lower inflation rate can be attributed to the stronger loonie.

Prediction is that the Fed in the US has slightly overshot rate hikes and will reverse course in 2007, lowering the rate to 4.75% from its current level of 5.25%.

With core inflation much lower in Canada, the Bank of Canada may have to lower rates further here due to the strong Canadian Dollar weighing heavily on non-resource exporters. The prediction is for Prime to fall from its current level of 6.00% to 5.25% by June 2007.

The bond market is predicted to perform well over the next 12 to 15 months with the 10 year benchmark Gov't bond yield moving from its current level of 4.32%, down to 3.95% in June 2007 and 4.00% in Dec 2007.

So basically low and even lower interest rates for fixed rate mortgages as well as variable rate mortgages being predicted for the remainder of 2006 and all of 2007 will continue to support a strong real estate and housing market in Canada.