{"id":10062,"date":"2015-07-15T06:25:10","date_gmt":"2015-07-15T11:25:10","guid":{"rendered":"http:\/\/olduvai.ca\/?p=10062"},"modified":"2015-07-15T06:25:10","modified_gmt":"2015-07-15T11:25:10","slug":"bank-of-canada-interest-rate-decision-to-cut-or-not-to-cut","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=10062","title":{"rendered":"Bank of Canada interest rate decision: To cut or not to cut?"},"content":{"rendered":"<div class=\"story-headline\">\n<h3 class=\"story-title\"><a href=\"http:\/\/www.cbc.ca\/news\/business\/bank-of-canada-interest-rate-decision-to-cut-or-not-to-cut-1.3149847\" target=\"_blank\">Bank of Canada interest rate decision: To cut or not to cut?<\/a><\/h3>\n<\/div>\n<p class=\"story-deck\"><strong>With interest rates at historic lows, could it possibly make sense to go even further?<\/strong><\/p>\n<p>It came as a shock to just about everyone when Bank of Canada governor Stephen Poloz announced the central bank would\u00a0<a href=\"http:\/\/www.cbc.ca\/news\/business\/bank-of-canada-shocks-markets-with-cut-in-key-interest-rate-1.2921370\">lower its benchmark lending rate in January<\/a>\u00a0to 0.75 per cent.<\/p>\n<p>That&#8217;s because after more than four years with a historically low one per cent, Canadians had been hammered with repeated warnings to\u00a0<a href=\"http:\/\/www.cbc.ca\/news\/business\/canadians-debt-levels-unsustainable-fitch-warns-1.2864352\">pay down debt because lending rates were bound\u00a0to go up<\/a>\u00a0\u2014 at some point.<\/p>\n<ul>\n<li><a href=\"http:\/\/www.cbc.ca\/news\/business\/should-stephen-poloz-be-more-worried-about-the-canadian-economy-1.3109418\"><strong>ANALYSIS | Should Stephen Poloz\u00a0be more worried?<\/strong><\/a><\/li>\n<li><a href=\"http:\/\/www.cbc.ca\/news\/business\/why-wobbly-world-markets-are-more-worrying-than-oil-don-pittis-1.3034038\"><strong>DON PITTIS | Wobbly markets are more worrisome than oil<\/strong><\/a><\/li>\n<\/ul>\n<p>Then a cratering oil price changed the narrative. When the bank cut rates in January, it was six months into an oil drop that saw crude go from $95 a barrel this time last year to under $50. That was devastating for the oil patch \u2014 but also for the rest of Canada&#8217;s economy.<\/p>\n<p>&#8220;This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada,&#8221;\u00a0<a href=\"http:\/\/www.bankofcanada.ca\/2015\/01\/fad-press-release-2015-01-21\/\">the bank said<\/a>\u00a0in explaining its bombshell rate cut.<\/p>\n<p><strong>Eagle eye on inflation<\/strong><\/p>\n<p>Although the bank keeps an eye on all sorts of economic data, the most important one from a monetary policy perspective is inflation \u2014 the upward creep of prices over time.\u00a0<a href=\"http:\/\/www.cbc.ca\/news\/business\/bank-of-canada-to-continue-inflation-targeting-1.1086568\">The bank has a mandate of inflation targeting<\/a>\u00a0because according to many economists, if you can keep inflation in a narrow band between one and three per cent, everything else in the economy \u2014 from jobs, to GDP and the like \u2014 tends to take care of itself.<\/p>\n<p>Lower lending rates make borrowing easier, which stimulates spending and investing, which nudges up inflation. Raising rates does the opposite.\u00a0At least, so goes\u00a0the theory.<\/p>\n<p><span class=\"Apple-style-span\">When the bank cut rates in January, it raised the possibility of another one down the line.\u00a0<a href=\"http:\/\/www.cbc.ca\/news\/business\/canadian-inflation-at-0-9-in-may-as-cost-of-food-climbs-1.3119826\">With Canada&#8217;s inflation rate currently at 0.9 per cent<\/a>, there would seem to be ample wiggle room to cut again.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bank of Canada interest rate decision: To cut or not to cut? With interest rates at historic lows, could it possibly make sense to go even further? It came as a shock to just about everyone when Bank of Canada governor Stephen Poloz announced the central bank would\u00a0lower its benchmark lending rate in January\u00a0to 0.75 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[942,103,3544,3000,426,1400,1154,943,7286],"class_list":["post-10062","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-canada","tag-cbc","tag-cbc-news","tag-inflation","tag-interest-rate-cut","tag-interest-rate-policy","tag-stephen-poloz","tag-unconventional-monetary-policies"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10062","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10062"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10062\/revisions"}],"predecessor-version":[{"id":10063,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10062\/revisions\/10063"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10062"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10062"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10062"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}