Wednesday, August 30, 2006

Falling Oil Prices May Spur the BoC to Lower Interest Rates as Inflation Pressures Ease

The recent decline in oil prices may speed up the Bank of Canada's plan's to reduce interest rates over the next 6-9 months. The recent run up in inflation in Canada has been caused by the high price of oil in two ways. First it increases the cost of energy to consumers and businesses and second it stokes the economies of the nations oil patch.

The effect of lower energy prices will have a larger effect on energy consumers costs than it will on oil patch revenue, but it will ease inflationary pressures on BoC decision makers concerned about inflation.

What this means for the Downtown Vancouver Real Estate Market;

A drop in rates will increase affordability and I think will create upward pressure on prices, though it may not increase the number of transactions. The market has slowed over the summer as it does in a more normal market, but I predict a hot autumn for the Downtown Market

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