Technical Analysis

Bank of Canada’s Rogers: Higher rates are starting to work to slow the economy/inflation

The Bank of Canada senior deputy governor Carolyn Rogers is speaking. She says:

  • higher rates are starting to work to slow the economy and tame inflation
  • risk of a trigger that may affect financial stability has increased, sites high household that an elevated house prices as long-standing vulnerabilities
  • we have a long way to go to get inflation back to target
  • adjustment will be painful
  • we are not expecting a severe economic downturn with the kind of large job losses typical of past recessions
  • there are good reasons to believe system as a whole will be able to whether this period of stress and remained resilient
  • we need lower house prices to restore balance to housing market, this could add stress for people who bought property recently with a variable rate mortgage
  • Bank research paper says that if rates go up another 50 basis points by May 2023, total number of variable-rate fixed payment mortgages hitting trigger point could rise to 65% (or 17% of all mortgages from 50% now)

The housing sector in Canada has the potential to be a big headwind as runaway prices in 2021 and early 2022 coupled with lower rates starts to unwind. Since rates are much higher now, the variable rate adjustments, coupled with declining values could cause intense pressure on some consumers.

The USDCAD is trading above and below the 1.3400 currently. The price is down on the day but near the middle of the North American range. The low bounced near the rising 100 hour MA currently at 1.33786. The low price reached 1.3382.

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