OTTAWA (Reuters) - Canada’s low interest rates are not fueling speculation in the housing market, Bank of Canada Governor Stephen Poloz said in an interview published on Friday, adding that economic growth in the country is still uneven.
Reiterating the bank’s dovish take on Canada’s fourth-quarter economic growth, Poloz told Macleans magazine that while stronger-than-expected data for that period looked good, the details were less so.
“You look beneath the surface and you discover it’s not actually in sustainable categories. Investment, hugely important for Canada, was still negative. Exports were okay but not great,” Poloz said.
“The core drivers are still lacking, and the things we know don’t have staying power - such as consumption and housing - were the surprise factors.”
The Bank of Canada cut rates twice in 2015 as low oil prices hurt the economy, and some have blamed low rates for spurring consumer borrowing. The bank has held rates at 0.50 percent since and is not expected to raise them until next year. [CA/POLL]
Asked whether the central bank shoulders responsibility for speculation on the housing market, Poloz said he “would pretty well reject that.”
“When you’re borrowing money to buy a house and you think you’re going to make 20 percent over the next year, I don’t think it’s going to make a difference if the interest rate you’re paying is 2 percent, 4 percent or 6 percent,” Poloz said.
“It’s still an important capital gain. ... It’s not low interest rates that are fuelling speculation.”
A surge in Vancouver and Toronto home prices have raised worries that demand in the cities is overheated.
The central bank does not know how much speculation is driving demand, but “extrapolated expectations” about rising prices is a possible factor, Poloz said.
Reporting by Leah Schnurr; Editing by Richard Chang