Douglas Porter
In a note to clients, Porter said he had no problem with the rate increase itself because the stronger economy had made a solid case for it.
But he blamed the information vacuum for causing a "great deal of uncertainty" and a "fairly violent market reaction."
Canadians hadn't heard a peep from the central bank since it raised the rate July 12 for the first time in nearly seven years, Porter wrote in Friday's note.
Ahead of the July increase, senior officials including governor Stephen Poloz sent clear signals the bank had shifted to a rate-hiking path.
However, for nearly two months before last week's announcement, the bank went dark.
"There was no communication since the last meeting. Zilch. Zip. Nada. Nothing," wrote Porter, who had been predicting the bank would wait until October to raise the rate.
"What we had here was a failure to communicate - an epic fail."
Last week's hike also came as a surprise, Porter argued, pointing to one survey that found only six of 33 forecasters had anticipated the increase.
In response to Porter's criticisms, the Bank of Canada released a detailed defence of its communications approach.
Bank of Canada spokesman Jeremy Harrison said in a statement that market data before the hike showed the odds of a hike were about 50-50.
Porter, meanwhile, said he believes there have been profound implications from the bank's progressive shift in tone. He suggested the steep climb in the value of the Canadian dollar since the spring has been related to the bank's tone swing from that of an institution on the verge of another rate cut as recently as early 2017 to that of "the most aggressive hiker in the world."
"I think it would just further dampen the market and probably push out the recovery," he said Wednesday.
Mr. Porter said a new increase coming so soon after July's rate increase "accentuates" the Bank of Canada's urgency to raise rates, which will leave many anticipating there could be yet another move later this year.
"So I wouldn't brush it off -- I think that will put a bit more upward pressure on some of the medium and longer-term mortgage rates as well, and of course the variable rates will move almost instantaneously," he said.
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"At some point, exports, capital spending and even infrastructure spending will have to step up to carry the load," Doug Porter, chief economist at BMO Capital Markets, told BNN.
"We simply can't count on the consumer (and housing) to continue leading growth in the years ahead."
While the rise in capital spending is "good news," Porter said he's "not sure we can call it a rotation yet, as consumer spending was also still very strong."
"At least we can say growth now looks much better balanced, and it may be the first real signs that a rotation away from a reliance on consumers/housing alone has begun."
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Now, Porter has given that bubble its death certificate.
"This is a late bubble. Bereft of life, it rests in peace," he wrote in a client note last week.
To prove his point, Porter published a chart showing home sales in some regions in Toronto retracing all their gains of recent years.
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"Some would argue that non-resident investors were not a big deal in the market. (Some would also argue that the earth is flat.)," writes BMO Chief Economist Douglas Porter in a Monty Python-referencing note published today.
On a seasonally adjusted basis, the overall value of home sales in York Region and Oakville-Milton nosedived 65 per cent and 53 per cent, respectively, in the four months following Ontario's late-April announcement of a foreign-homebuyer tax for the Greater Golden Horseshoe.
"We would simply point out that these two regions were heavily influenced by non-resident buyers," Porter continues.
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Porter's comments came as the Canadian Real Estate Association issued its January numbers, showing Greater Toronto's benchmark house price rising 22.6 per cent over the past year, to $705,900.
Toronto house prices are seeing "the fastest increase since the late 1980s – a period pretty much everyone can agree was a true bubble," Porter wrote.
Porter suggested that, despite what the industry is saying, there is little evidence of an overall supply shortage.
"Housing starts in Toronto and Vancouver have been chugging along at almost 70,000 units per year recently, an all-time high, while overall Canadian starts are above demographic demand at 200,000 units in the past year," he wrote.
"And, we are seeing near-20-per-cent price gains in Toronto condo prices, where supply constraints are not a major issue" Porter continued.
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