Hike, cut or stand? The Bank of Canada today decides on interest rates


It is expected that the Bank of Canada will not change its reference rate when it will disclose its latest decision on Wednesday, but this does not mean that policymakers in the bank consider that nothing has changed in the economy of the country.

The bank's interest rate, known as the overnight rate of interest, is the interest rate that lends to the bank for short-term loans and is reduced to the level that Canadian borrowers and savers get on savings accounts, credit lines and floating rates. mortgages.

The central bank will announce its most recent decision on interest rates at 10:00 ET. CBC News will follow the live decision and a press conference shortly thereafter.

In October, when the bank finally raised its interest rate to the current level of 1.75 percent, the central bank justified its decision by pointing out the various ways in which the economy burst. Inflation was at the pinnacle of the range that the bank wants to see in determining monetary policy, and the labor market has stretched.

The price of a barrel of oil dropped from its highest value, but the West Texas Intermediate was still trading north of $ 65 per barrel, while business investments were also rounded into shape. Add all that, and the economy was on the right track to increase by about 2.1 percent this year – just enough to justify a modest contraction in the bank's interest rate to a more normal level.

But that was then, and that's right now.

Since then, the Canadian economy has shown enough signs of weakness that there is speculation that it might come sooner or later to a reduction, and at least economists covering the central bank will lower their expectations as to how many journeys are possible on the go.

On Tuesday, the new figures from the Statistics Office of Canada showed that the trade deficit in Canada doubled to $ 2.1 billion in November, mainly as oil prices fell sharply and fed on the export side of the book.

According to economist Scotiabank Derek Holt, the window on trade conditions will further ease, as the shutdown of the US government has a potentially impact on December data on trade, and in Alberta, a decrease in energy exports in January.

If there are reasons for optimism, says Holt, the downturn brings a "horrific" pace for Canadian exports earlier this year, so some drops were expected. One question I would like to hear [Bank of Canada] tomorrow, the question is to what extent they believe that the latest data is due to … abandoned export demand, "he said.

Economist Avery Shenfeld and CIBC say that the bank is in a difficult situation, whereby the needle is included in the inclusion of reduced expectations and that it is not good to suggest a reduction maybe necessary.

"We see that the tone of the statement following the example" we will answer later "instead of" we all ended up here, people "in terms of further tightening of interest rates," said Shenfeld, adding that he expects the bank to remain at the side of at least until April.

This is a similar time frame as Robert Dent predicts at the Japanese investment bank Nomura Securities Inc., with a slight rise to two percent in April, followed by another cautious at the end of the year.

Dent notes that, despite some dark clouds on the horizon, the Canadian economy is making good progress in many other areas, especially in the labor market, where the unemployment rate fell to the lowest record level in November from 5.6 percent, and even succeeded. Also, there, stay there until December.

These data points will be the factors that the bank will take into account and the reason why the Canadian bank has remained on the path it has already set.

"The December statement proposes policy makers to continue to be convinced that further interest rates will be needed," he said, but "the impact of rising interest rates on over-indebted households, steadily lower crude oil prices and the slowdown in global growth pose a negative risk for The forecasts of the Bank of Canada, which will be confirmed at the January meeting.

Montreal Banker, Benjamin Reitzes, says that the image with cloudy disorders is obviously wrong on the side of caution, but the question is how much?

"Outside some genuine domestic data points," he said, "the policy deteriorated, largely due to the global economic and financial situation. Consequently, Governor Poloz and the bank expect greater caution to stay at least at least for the next few months . "

While everyone, except one of the 18 economists who are accompanying Bloomberg, think that they are doing nothing, the most likely result is that traders with investments known as overnight index changes consider that there are about one in six options for lowering rates on Wednesday.


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