the Wealthy Canadian

The news this week:

• The Fed dropped the federal funds rate 50 basis points to 4.75%, in addition the discount rate also saw a 50-basis-point decrease to 5.25%.
• The Canadian dollar strengthened and is currently trading around par with the American.
• Statistics Canada released the August inflation numbers.  Total CPI is down to 1.7% and the core went down 2.2%.  The drop was largely due to  a fall in gasoline prices.
• Oil has been hitting new highs as well crossing above $80/bbl.
• The Calgary Real Estate Board finally released their August sales info.  9600 listings, only 2500 sales and the median price also decreased.

For whatever reason (fear of recession, to alleviate the credit crunch), the Fed cut rates.  That will be good news to American homeowners and leveraged businesses alike.  With the Fed cut and increased commodity prices, the Canadian dollar is continuing its strengthening trend.  Whether these things are good news are not is a matter of opinion, however, I am concerned with the rapidity of the change.

For the past two years Calgary was leading the nation in its real estate market, and inflation in general.  Now for the first time in years it is a buyers market.  If nothing else this might indicate that the Western economy has balanced out.  Canada’s CPI numbers also show that inflation has slowed, largely due to decreased gasoline prices.  Since gas prices are volatile this may only be a blip but if all house prices cool off as well then inflation may start to trend down.