Several Canadian economists are also foreseeing a slowdown, rather than a meltdown. Still the latter remains a possibility, Pimco’s Ed Devlin said in an interview with the Globe and Mail, if one of the following shocks occur:
1. Interest rates would have to spike sharply, which simply isn’t in the cards. The Bank of Canada isn’t anywhere near a rate hike, and in fact has left the door open to a cut from its current policy rate of 1 per cent.
2. Unemployment would have to spike. While the jobless rate isn’t projected to decline – rather, it’s expected to hover around the 7 per cent mark – it’s not forecast to surge either.
3. Mortgage credit would have to be “disrupted.” Also not in the cards. “The Canadian banking system continues to provide sufficient mortgage credit to keep the housing market financed.”
Overall, Pimco sees “modestly” higher mortgage rates, tighter mortgage rules, an ongoing “modest” economic rebound, and still-stretched property values.
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