Bank of Canada Admits Key Rate 'Too Blunt' to Fix Housing Unaffordability
A senior official at the Bank of Canada has stated that the country's key interest rate is 'too blunt' to fix housing unaffordability, highlighting the complexities involved in addressing this issue. Senior Deputy Governor Carolyn Rogers made these comments during a speech in Victoria, B.C., where she outlined the complex interplay between housing, regulation, the economy, and the Bank of Canada.
Rogers noted that in 2000, residential investment accounted for 4.3% of Canada's gross domestic product, while business investment in equipment and machinery sat at 8.3%. These shares are now largely reversed, with residential investment now accounting for a larger portion of the economy.
The Bank of Canada has tried to incorporate a housing affordability lens into its five-year mandate review with the federal government, which is set for this fall. However, Rogers acknowledged that tracking home prices as part of inflation measures can be complicated due to the asset and cost nature of housing.