Some industry experts are calling for another rate cut from the Bank of Canada.

There are several possible developments — first and foremost, a global economic downturn — that could push Canada’s central bank to trim its policy rate, which influences mortgage rates.

But there’s one big reason it shouldn’t, at least for the time being, suggests BMO Chief Economist Douglas Porter.

“Perhaps the strongest argument in favour of the Bank staying put is the fear of fuelling another round of housing fervour,” writes Porter in a report.

“The risk is that BoC rate cuts could send a loud message to potential home buyers: ‘All is forgiven, the taps are open wide again, and let loose the borrowing,’” he warns.

Porter notes that a rate cut would run contrary to policymakers’ efforts in recent years to steer Canadian housing to a soft landing, rather than a crash.

“After years of struggling to guide the good ship Canadian housing in for a soft landing, the last thing policymakers want to see is a renewed takeoff — lesson learned in 2015,” he continues.

Since 2016, which was a record year for home sales, all three levels of government have introduced policies, including foreign homebuyer and vacant-home taxes, with the aim of calming an overheated market.

Meantime, the Bank of Canada has hiked the overnight rate five times since the summer of 2017 and likely isn’t keen on doing an about face.

Although this cocktail helped put a lid on parabolic price movement, Porter notes that May home sales were up 6.7 percent annually, the largest such gain in any month over the past three years.

“While prices are mixed across the country, many of the weakest markets — primarily in the West — are showing signs of stabilizing, while the robust markets remain robust,” writes Porter.

“[T]he case for BoC cuts is simply not there ….. yet,” says Porter.

BMO : Interest Rate Cut Could Put Canadian Housing Back in Bubble Risk Territory by Josh Sherman | Livabl