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BoC will cut interest rates twice this year says Capital Economics

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The Bank of Canada will make two interest rate cuts during 2019 according to Capital Economics.

That’s because BoC governor Stephen Poloz may have underestimated the downturn in the housing market and the wider impact to the economy, senior economist for Canada Stephen Brown told BNN Bloomberg.

He said that with condo presales in Toronto and Vancouver in 2018, developers have found it harder to secure investment in new projects. That, says Brown, is likely to have an impact on employment and consumption, making a big dent in the country’s output.

“Condo developers have to sell about 70% of the units in their condo before they start construction, in order to secure financing,” Brown said. “So the current housing starts represent homes that were actually sold, as pre-construction units, around 18 months ago.”

He noted that the figures he’s looking at are niche and not being widely considered.

On interest rates, Brown and his team are forecasting a drop this year to 1.25% from the current 1.75% which will be facilitated over two rate cuts.

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