Bank of Canada’s agenda is to keep loonie low, asserts leading economist – while also strongly criticizing "back-of-envelope" reports on impact of foreign buyers

There are no signs that interest rates are going to increase any time soon – not until likely the end of 2017, CIBC World Markets chief economist Benjamin Tal said March 30.

Speaking to a sold-out audience at the Vancouver Real Estate Forum at the Vancouver Convention Centre, Tal said that the Bank of Canada’s agenda has been, and will remain, keeping the Canadian dollar low – and that means suppressing interest rates for longer.

Tal, who is considered arguably the country’s leading housing market economist, said to the packed room, “Even if the Fed raises rates in June, and December, the Bank of Canada will not. This bank has an agenda, and that agenda is a weaker Canadian dollar.

“Why? Partly because during the dark days of parity with the US dollar – and they were dark days, we had no business being at par with the US dollar – we lost 10 per cent of capacity in Canadian manufacturing.”

He added that even if the Bank of Canada did raise rates in late 2017, it would do so very slowly – describing the central bank as “extremely dovish.”

Foreign Investment

Tal also told delegate that he believed the level of overseas investment in real estate – offshore buyers parking their money in Vancouver property but not living in the city – was lower than perceived. However, he said that the “satellite situation” – whereby an immigrant family lives in Vancouver with the primary earner mostly living and working abroad – was likely higher than perceived, and little talked-about.

However, Tal added that in terms of information on the impact of foreign buyers in the market, that we are “flying blind” and that there is “only one thing worse than no information, and that’s bad information.”

He strongly criticized the “back-of-the-envelope” calculations that are being widely reported, as well as slamming the mainstream media for “being all over them.” Tal asserted that it is dangerous to report inaccurate claims as it can lead to misinformed policy.