Central bank holds rate amid oil slump; casts doubt on future hikes

Bank of Canada Governor Stephen Poloz. Image file

Bank of Canada Governor Stephen Poloz. Image file

Lower growth prospects are expected to reinforce Bank of Canada Governor Stephen Poloz's strategy of moving very gradually on increases to its overnight rate.

The central bank, which has lifted rates fives times since July 2017 as the economy strengthens and reaches capacity, repeated that more monetary tightening would be needed to help meet its 2.0 percent inflation target.

None of the economists polled by Bloomberg were expecting an increase this time around, but trading in investments known as overnight index swaps implies there's a two in three chance of a rate hike next month. Business investment fell in the third quarter, in large part due to heightened trade uncertainty during the summer.

Canada's central bank chief indicated during a news conference in Toronto on Thursday that he may not be able to do much to lift markets, which have slumped this week amid concerns that trade tensions between China and the USA are far from resolved. The statement again discussed rates getting to "neutral", but with the significant change that the policy rate requires to rise to a neutral range - rather than to a neutral stance as discussed in October.

"It is already clear that a painful adjustment is developing for Western Canada, and there will be a meaningful impact on the Canadian macroeconomy", Poloz said in an address to be delivered at a breakfast event hosted by CFA Toronto.

Virat Kohli booed by Australian fans; Head, Ponting critical of crowd behaviour
The start of proceedings on day 3 delayed due to some rain interruption which pushed a 45 minutes late start to the day's play. I was bowling and there were a lot of overs under my belt.

"In light of these developments and associated cutbacks in production, activity in Canada's energy sector will likely be materially weaker than expected", it said of an industry that generates more than 10 percent of the nation's exports receipts. In the years that have followed the last slump, the sector has adjusted its cost structures, wages and employment levels, Poloz said. Another is that the economy continues to do relatively well, growing at a healthy 2.2 percent clip so far this year, following a 3 percent pace in 2017.

Market watchers, many of whom had expected the bank to increase the rate in January, now believe the recent economic developments will delay the timing of future rate hikes.

He added he remains hopeful business investment will rebound now that much of the uncertainty surrounding North American free trade has eased with the new agreement between the United States, Mexico and Canada.

But it noted downward revisions by Statistics Canada to growth figures, together with recent macroeconomic developments, "indicate there may be additional room for non-inflationary growth".

Moving forward, the bank will scrutinize the results of its quarterly survey of business executives, to be published December 21, for clues on corporate sentiment. "We have to do our work in order to understand the shock better and what its magnitude actually is".

Recommended News

  • Trump lashes out at Mueller after Cohen and Manafort filings

    Trump lashes out at Mueller after Cohen and Manafort filings

    They said his sentence should reflect a "modest" reduction from the four to five years they said federal guidelines would suggest. Trump tweets: " Robert Mueller and Leakin' Lyin' James Comey are Best Friends, just one of many Mueller Conflicts of Interest".
    SABCS: Breast Cancer Outcomes Worse for Blacks Despite Similar Gene RS

    SABCS: Breast Cancer Outcomes Worse for Blacks Despite Similar Gene RS

    About 84 percent of the patients were white, 7 percent were black , 4 percent Asian and 4 percent were of other or unknown race. She's chair of oncology research at Loyola University Chicago Stritch School of Medicine.
    Boris Johnson ordered to apologise for failing to declare £52000 in income

    Boris Johnson ordered to apologise for failing to declare £52000 in income

    The former foreign secretary offered a "full and unreserved" apology in a 35-second statement in the House of Commons . Speaker John Bercow thanked him for his "prompt" response and said that was the end of the matter.
  • Cavs’ Tristan Thompson Fined $15,000 For Flipping Off Heckler

    Cavs’ Tristan Thompson Fined $15,000 For Flipping Off Heckler

    They face the Sacramento Kings in the early hours on Saturday morning. Predict 6 correct scores for your chance to win £250K.
    U.S. EPA to propose easing rules on new coal plants

    U.S. EPA to propose easing rules on new coal plants

    Federal government figures continue to show otherwise, however, as market forces inexorably tamp down coal demand. Natural gas prices have stayed relatively low since USA domestic natural gas production began to grow in 2007.
    Marlboro maker places $1.8 billion bet on marijuana

    Marlboro maker places $1.8 billion bet on marijuana

    The transaction gives Altria a 45% interest in Cronos, which operates in both the medical and recreational marijuana markets. Marijuana, while still illegal on the federal level in the U.S. , is allowed in an increasing number of states.
  • New 'Far Cry New Dawn' Gameplay Revealed

    New 'Far Cry New Dawn' Gameplay Revealed

    Left unattended, the Highwaymen will retake them and increase security, upping the difficulty each time you come a-knockin'. The game releases in a little over two months, so I'm sure Ubisoft will drop some in-game footage soon enough.
    Liverpool - Premier League - 8 December 2018

    Liverpool - Premier League - 8 December 2018

    After Firmino won the ball back, Salah ran at the Bournemouth defence and finished into the bottom corner. After a relatively slow start to the campaign, Salah is now scoring at a similar rate to last season.
    Multiple deaths reported at Italian nightclub

    Multiple deaths reported at Italian nightclub

    It appears that the panic began when someone in the club sprayed a "irritant substance", the civil protection agency tweeted. A further 120 people were injured, including around 10 seriously, local media reported, citing local rescue authorities.
  • "Aquaman" Sequel Already In Discussion At Warner Bros

    Warner Brothers employed a novel strategy in attempting to buck that trend with Aquaman , and it appears to be paying off. It seems like a lot will ultimately hinge on how this is received and how well it performs at the box office.
    Korea’s tax burden ranked 32nd out of 36 OECD nations

    Korea’s tax burden ranked 32nd out of 36 OECD nations

    The French government's tax revenues were equivalent to 46.2% of its economic output, up from 45.5% in 2016 and 43.4% in 2000. France took the top spot away from Denmark in 2017 in the OECD's annual review of taxes in its 36 member countries.
    Kagame critic 'not guilty' of inciting insurrection

    Kagame critic 'not guilty' of inciting insurrection

    He became president in 2000, a post he might hold until 2034 thanks to a constitutional amendment made three years ago. Since her arrest, Ms Rwigara's family have been subject to interrogations and their family assets forcibly auctioned.

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.