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Bank of America forecasts another rate cut in Canada
Gloomy outlook for Canadian economy sees loonie pushed to 73 cents
Bank of America, one of the U.S.’s biggest banks, says the Bank of Canada may have to cut its key lending rate again later this year.
Bank of America says Canada’s economy will underperform the U.S. this year, hampered by low oil prices and worries over manufacturing competitiveness.
- Oil shock will hurt but will be short lived, Poloz says
- Time to stop waiting for America’s economic recovery: DonPittis
Already Canada is seeing investors move away from its bond and equity markets as they seek out a surer return in the U.S., the bank says.
Author Emanuella Enenajor says Canadian central bank governor Stephen Poloz is “handcuffed by the Fed,” which is expected to raise rates later this year.
U.S., Canadian economies on different paths
Bank of America says Bank of Canada governor Stephen Poloz will be ‘handcuffed by the Fed’ into raising rates. (Canadian Press)
“Even as the Fed begins a gradual rate hike cycle this year, we think the Bank of Canada will remain accommodative, and will likely ease by another 25 basis points to 0.5 per cent if growth disappoints, as we expect,” she wrote in a report released today.
She points to a decoupling of the Canadian and U.S. economies, so that growth in the U.S., which is expected to be robust, will not have the stimulating effect on the Canadian economy it did in the early 2000s.
A 1 per cent increase in US domestic demand lifts Canadian GDP by about 0.25 per cent under current conditions. Ten years ago, the impact of that same one per cent rise would have been twice as much of an impact on Canada’s economy, the report said.
Poloz has acknowledged weakness in Canada’s economy in the first quarter, but expects a rebound later in the year as exports grow because of U.S. demand.
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Stephen Poloz may let inflation creep higher: Don Pittis
Bank of Canada governor may prefer an inflation bump to the damaging impact of higher interest rates
Which would you prefer, higher interest rates or higher inflation?
If you are someone who actually watches what the Bank of Canada does month to month, its two per cent inflation target may seem sacrosanct.
In which case, you might be surprised to hear that the concept of raising or lowering interest rates to freeze inflation at exactly two per cent is a relatively recent innovation. It was put in place in reaction to the soaring prices and wages of the 1970s and 1980s.
And the Bank of Canada has been seriously considering changing that target. Any change would still require a new agreement between the federal government and the bank. The current agreement is scheduled to end next year.
A fresh report from the business news service Bloomberg implies that the bank could surprise us with just such an announcement any time soon.
A higher inflation target means prices, from clothing to gasoline, could increase at a faster rate without fear of higher interest rates that might slow the industrial economy. (The Canadian Press)
“After shocking markets with an interest rate cut in January,” wrote Bloomberg’s Greg Quinn, “Bank of Canada Governor Stephen Poloz is considering whether to deliver another surprise: changing the central bank’s two per cent inflation target.”
‘No surprise’
Quinn does not offer the source for his latest story, but he follows the bank’s activities assiduously. The Bank of Canada, on the other hand, was quick to play down the story.
“It is absolutely wrong to characterize research done by the bank on the implications of a higher inflation target as a surprise,” said an official bank spokesperson in response to my inquiry as to whether the Bloomberg story was true.
Canada’s Central Bank is Headed by a Comedian
Canada’s Central Bank is Headed by a Comedian
Yet Another Delusional Bubble Blower
Canada is home to one of the most egregious housing and credit bubbles in the world – a legacy of its former central bank governor Mark Carney, who is now blowing a similarly dangerous bubble in the UK as governor of the Bank of England. For some background information on this, see:
Carney’s Legacy: Canada’s Credit and Housing Bubble
Mark Carney: If There is a Bubble, It’s Not Our Fault
After having slashed interest rates to the bone in Canada and instigating a mortgage credit and consumer lending boom that has inter alia led to one third of Canadians complaining that they can no longer sleep properly due to worries about their huge debt loads, Mr. Carney is now presiding over this in the UK:
The BoE’s current base rate is the lowest since the central bank was founded in the late 17th century – click to enlarge.
Stephen Poloz picked evidently up where Carney left off. While the data on Canada’s housing bubble are plain as day to anyone with a set of eyes and an IQ temperature above 80, the comedian who has become Mr. Carney’s replacement as governor of the Bank of Canada somehow just can’t see it. This is highly reminiscent of Ben Bernanke’s frequent denials in 2006 that there was a housing bubble in the US, even as the bubble became so freaking obvious one literally had to be in a coma not to see it. From a tweet by Forex Live in December last year:
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Why wobbly world markets are more worrying than oil: Don Pittis
Central bankers are out of bullets if 1929-level markets go bust again
Bank of Canada governor Stephen Poloz says the “wobble” in the Canadian economy caused by the shocking fall in the price of oil is just about over.
But according to some analysts, a more dangerous wobble may be connected to an entirely different mineral: mercury.
And if so, central bankers will find themselves helpless to deal with the fallout.
- Bank of Canada leaves rates unchanged after “wobble”
- China exports plunge and talk of stimulus heats up
In his news conference Wednesday, it seemed the bank governor’s biggest international concern was that the U.S. economy would grow even more quickly than he expected, forcing him to raise interest rates sooner.
Considering how everyone pounced on the his recent description of the Canadian economy as “atrocious,” there is little wonder he did not warn of an impending market crash.
‘Atrocious’ growth
With growth at zero, using the term “atrocious” was no exaggeration.
However, it just shows that if a staid but influential character like Poloz reminded us that markets — especially at current elevated levels — are mercurial, it could cause some serious fallout. Others are not so shy.
A report out of the U.S. last month titled “Quicksilver Markets,” (quicksilver being an older, less frightening word for mercury), contained a far more worrying warning: that global stock markets are now hitting levels seen just before the bursting of previous major market bubbles.
“The highest market peaks (1929, 1999 and 2007) either surpassed or approached this two-sigma level,” says the report. “Each of these peaks was followed by a sharp decline in stock prices and adverse consequences for the real economy.”
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Youth Should Work For Free – Bank of Canada Recommends | Armstrong Economics
Youth Should Work For Free – Bank of Canada Recommends | Armstrong Economics.
What is seriously being overlooked here around the world politically is we are dealing with a revolution of the youth as a consequence of the collapse in Marxism. Pictured above is Bank of Canada Governor Stephen Poloz who has amazingly stated that the rising unemployment among the youth who are living in their parent’s basements, should just consider working for free. That’s right! Adult children stuck in their parents’ basements should take unpaid work to bolster resumes as they wait for the recovery to take hold, which does not appear to be until about 2020.
The Bank of Canada estimates about 200,000 young people want to work or work more in Canada, but this seems to be an under-estimation. Poloz actually said that they may be scarred by prolonged unemployment that prevents them from moving out on their own.
Here in lies the crisis and it is the product of Marxist-Socialism and raising the taxes on the hated “rich” who create the jobs, yet the average person pictures Warren Buffet not the owner of the local store selling bread and milk. Small business creates 70% of the work force – not the big corporations that banks and politicians cater toward these days. They keep raising taxes on small business preventing people from trying to expand or start a business and the tax revenues go only in the pockets of politicians – they do not lower taxes for the middle class. Great slogans that the rich should give back, but the problem is it goes nowhere but to fund the pensions of government workers – nothing to lower the taxes on the lower classes.
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