Economic Commentaries You can also keep up with my Economic
Commentaries (I produce about two a month) which discuss interest rate and
exchange rate trends among others. Kenneth Matziorinis
Tuesday 25 November 2008 OTTAWA: PRICE OF GAS BRINGS INFLATION RATE DOWN
Canada's inflation rate fell sharply to 2.6 per cent last month from 3.4 per cent in September. The federal government agency Statistics Canada says consumer prices fell one per cent in October from September, the largest drop since June 1959. The agency says the price of gasoline was the main reason for the sharp decline. The price of gas was 13.4 per cent lower in October than in September. However, food prices continued to rise in October, up 6.1 per cent from last year.
Saturday 25 October 2008 OTTAWA: INFLATION DROPS SLIGHTLY
Statistics Canada reports that inflation declined by .1 per cent in September to 3.4 per cent. The agency says it's the first time since March that the rate has fallen. The recent inflationary rise is due mainly to energy and food prices. The price of gasoline rose 26 per cent in September compared with that a year earlier.
Saturday 25 October 2008 Some Currencies Plunge as Stocks Sink Worldwide WASHINGTON — Fear that the financial crisis is infecting once-healthy economies created another white-knuckle day for investors Friday, causing stocks to tumble from Tokyo to New York.
Wednesday 22 October 2008 OTTAWA: CENTRAL BANK LOWERS LENDING RATE
The Bank of Canada cut its interest rate by a quarter of a percentage point on Tuesday to 2.25 percent. The move will ease the cost of borrowing. Later this week, Finance Minister Jim Flaherty is expected to announce that the federal government will guarantee loans made between Canadian banks. All of these moves are aimed at strengthening the economy following a collapse of global markets several weeks ago because of a mortgage crisis in the United States. The central bank also offered pessimistic growth predictions, forecasting growth of .6 per cent this year and next, down from an earlier forecast of one per cent this year and 2.3 per cent in 2009. After the central bank presented its latest projects, the TSX fell by 456 points, or 4.4 per cent to 9,796. The Canadian dollar dropped to its lowest level in 14 months.
Saturday 11 October 2008 TORONTO: PM 'DISAPPOINTED' BY BANKS INTEREST CUT RESPONSE
The prime minister, Mr. Harper, says he's "disappointed" by the reaction of the country's major banks to Wednesday decision by the Bank of Canada and other central to cut their trend-setting lending rate by one-half a percentage. The Bank of Canada's overnight rate has dropped by .5 per cent to 2.5 per cent. But the banks said they would drop their prime rate by only one-quarter of a point to 4.5 per cent, instead of the full half-point which the central banks had hoped would be passed down to consumers. While expressing disappointment, Mr. Harper said he's optimistic that consumers eventually will see the full effect of the reduction. The Canadian Bankers Association explained that many factors affect interest rates, some of them out of the banks' hands. An Association spokesman cited the conditions in financial markets and the availability of funds, as well as the Bank of Canada rate.
Saturday 11 October 2008 TORONTO, BRANTFORD: OTTAWA BUYS MORTGAGES
Federal Finance Minister Jim Flaherty has announced a plan by which the government will buy up $25 billion worth of residential mortgages from banks and transfer their ownership to the Canada Mortgage and Housing Corp. The mortgages of which the government is relieving the banks are already government-insured. Prime Minister Stephen Harper, for his part, denied that the government is bailing out the banks by acquiring bad assets, but rather is making cash available to banks so that they have the cash to make available for loans for the general public. The prime minister explained that the problem is "...an international credit crunch, which has banks leery of lending money even among themselves."
Saturday 11 October 2008 Mortgage purchase spurs rate cut
Facing a barrage of public criticism, big banks lowered their prime lending rates again yesterday after the federal government announced plans to buy from them $25 billion in residential mortgages – a massive cash injection designed to shore up this country's banking system.
Wednesday 17 September 2008 The U.S. Federal Reserve on Tuesday declined to heed financial markets' pleas to reduce lending rates by half a point in the wake of the fall or abrupt sale of two of the country's biggest investment banks, Lehmann Brothers and Merrill Lynch. The Fed held its base lending rate at two per cent, a decision that some analysts said was a vote of confidence in the power of the national economy. But some analysts predicted that the Fed might still reduce rates sometime in the future. Further worry was added on Tuesday when shares in the American giant insurance company, AIG, slid as much as 70 per cent after a credit downgrade sparked fears of a collapse. AIG was in crisis talks at the New York Federal Reserve, seeking a short-term loan of as much as 75 billion dollars. On the New York Stock Exchange, the Dow Jones staged a rally and closed up about 140 points.
Stephen S. Poloz VP EDC Economics Weekly Commentary Inflation’s Great Disappearing Act - August 27, 2008 It’s the last thing anyone would expect when we’re all bracing for slowdown. But surging food and energy prices put inflation high on the list of economic worries earlier this year. World prices for food and energy have since slipped back, but inflation fears remain. Will those fears dissipate? Past issues | his WN page
Ben Bernanke says recent declines in commodity prices are encouraging
US Federal Reserve chairman Ben Bernanke has said the inflation outlook for the country is "highly uncertain".
And he said that rising prices, coupled with the effects of the credit crunch, had given the US economy a battering.
Mr Bernanke, speaking to a Kansas City Federal Reserve Bank conference in Jackson Hole, Wyoming, said Fed policy makers had to preserve price stability
Friday 22 August 2008 OTTAWA: INFLATION HITS FIVE-YEAR HIGH
Statistics Canada reports that inflation in July rose 3.4 per cent compared with the previous month, the highest jump in five years. The increase was due mostly to the price of gasoline, which was almost 29 per cent higher than a year earlier. The rate would have been only about 2 per cent without gas being factored in. Other factors were higher natural gas and food prices, the latter caused by rising grain costs
More than a million people have lost their homes in the US housing crisis
The US Senate has approved a rescue bill designed to prop up America's battered housing market.
The new law creates a $300bn (£150bn) rescue fund to help thousands of homeowners get cheaper loans.
It may also be used to bail out the struggling mortgage giants Freddie Mac and Fannie Mae, which own or guarantee around half the nation's mortgage debt.
Thursday 24 July 2008 OTTAWA: INFLATION BOUNDS
The inflation rate rose above three per cent for the first time in three years. Statistics Canada said the rate was 3.1 per cent in June, compared with 2.2 per cent in May. Gasoline prices were the main factor, having risen almost 27 per cent higher than a year previous. Had it not been for the cost of gasoline, the rate would have been 1.8 per cent. Food prices are beginning to factor into the inflation rate, rising three per cent from 12 months earlier.
Thursday Jul 24, 2008 Jump in inflation might be short-lived
A scary surge in Canada's inflation rate last month might turn out to be short-lived if a sharp pullback in oil continues... All eyes were on the price of crude yesterday after Statistics Canada reported the country's consumer price index jumped by 3.1 per cent in June with sharply higher gasoline and food prices being key culprits.
Tuesday 22 July 2008 The Culture of Debt
America once had a culture of thrift. But over the past decades, that unspoken code has been silently eroded.
Wednesday 16 July 2008 Fed boss warns of growth 'risks'
US Federal Reserve boss Ben Bernanke warns there are still "downside risks" to growth in the world's largest economy. He also said that the "upside risks" to inflation had intensified recently.
Wednesday 16 July 2008 OTTAWA: CENTRAL BANK RATE UNCHANGED
The Bank of Canada lending rate remains unchanged at three per cent. The Bank made the announcement on Tuesday, saying inflation and growth will be worse this year than previously forecast. The central bank says high energy prices will push inflation above four per cent by the first quarter of 2009. That's about one percentage point higher than it had previously predicted. But the bank says that by keeping interest rates at current levels, it expects inflation to return to its two per cent target by the second half of 2009.
Sunday 29 June 2008 TORONTO: CREDIT VOTE MAY PROCEED
Ontario Superior Court has ruled that an investor vote on a plan to resuscitate $32 billion worth of frozen asset-backed commercial paper may proceed on Friday as scheduled. The court ruled against parties who wanted a delay, finding that such an eventuality would doom a restructuring plan. The freeze resulted from the international credit crisis that originated with the U.S. high-risk mortgage meltdown last August. Under the plan by the "Pan Canadian" investor committee, short-term ABCP notes would be exchanged for long-term securities in the expectation that by the time they mature, the underlying assets will have recovered all or most of their value. For the plan to succeed, it requires the acquiescence of more than one-half of the votes cast and be approved as well by noteholders representing at least two-thirds of the value of the outstanding notes.
Friday 27 June 2008 Expectations of inflation have risen. How worried should central bankers be? IN 2002 John Taylor, a well-known monetary theorist, gave a speech in honour of Milton Friedman, the great economist who died in 2006. Mr Taylor described how the low and stable inflation of the previous two decades emerged from a more disciplined monetary policy, inspired in part by Friedman’s analysis. “In the United States when the inflation rate approached 4% in 1968, the federal funds rate was about 5%. When the inflation rate approached 4% in 1989, the federal funds rate was about 10%, clearly a much larger response.” Once again, America’s inflation rate is at 4% but the fed funds rate is just 2%. With inflation high and interest rates low, many are worried that the lessons set out by Mr Taylor and by Mr Friedman before him are being ignored.
Wednesday 25 June 2008 US rates expected to stay at 2%
US interest rates are expected to remain at 2% as the housing market slows and consumer confidence slides.
Saturday 21 June 2008 CALGARY: CENTRAL BANKER WORRIED ABOUT INFLATION
The governor of the Bank of Canada, Mark Carney, says it's important to keep inflation low if the country is to profit from the current high world commodity prices. Mr. Carney says it's wise to remember the commodities boom and subsequent crash of the 1970s and thus not to become complacent about inflation. The inflation rate passed two per cent in May for the first time in four months, in part because of rising gasoline prices. On June 10, the Bank of Canada announced it was maintaining its trend-setting interest rate at three per cent, a move that surprised some economists who had predicted a decrease of a quarter of a percentage point.
Tuesday 17 June 2008 Producer Prices Rise 1.4% in May
The rate was the fastest in six months, but core inflation — excluding food and energy — grew only moderately. The Producer Price Index advanced 1.4 percent in May, its fastest pace in six months and another troubling sign that inflation is worsening, the government said Tuesday in a report.
Monday 16 June 2008 A riddle answered
How inflation affects bond and equity yields One approach sees equities and bonds as assets that compete for a place in investors' portfolios. If one asset class becomes overpriced, then investors will flock to the other. The conventional way of comparing the two is to look at the yields.
But which equity yield? In more conservative times, investors looked at the dividend yield. Until the late 1950s, it was common for the dividend yield on the stockmarket to be higher than the government-bond yield; after all, since dividends could be cut, they were more risky.
Sunday 15 June 2008 Fuel costs push up US inflation US inflation rose at its fastest pace for six months in May because of sharply higher energy costs.
Wednesday 11 June 2008 OTTAWA: CENTRAL BANK MAINTAINS LENDING RATE
The Bank of Canada's interest rate will remain at three per cent because of inflation concerns. There had been speculation the rate would be reduced on Tuesday by a quarter of a percentage point to 2.75 because of the weakening global economy. A cut to the bank rate rate normally results in lower borrowing costs for consumers.
Tuesday Jun 10, 2008
Bank of Canada holds the line on rates
The Bank of Canada defied expectations on Tuesday in holding its benchmark interest rate steady at 3%.
The bank said that the balance of risks to its April projection for inflation has shifted slightly to the upside. It noted that global economic growth and the resulting demand for commodities have offset continuing weakness in the U.S.
The bank said many of the downside risks to inflation highlighted in April have eased, while the situation in global credit markets has progressed as expected.
Core inflation should stay below 2% through 2009, the bank said. Both total and core inflation should converge at 2% in 2010 as the economy returns to balance.
Friday 09 May 2008 Wed1365 page2 for a good report on the The economy
Thursday 08 May 2008 All of Inflation’s Little Parts
Each month, the Bureau of Labor Statistics gathers 84,000 prices in about 200 categories — like gasoline, bananas, dresses and garbage collection — to form the Consumer Price Index, one measure of inflation.
Tuesday 06 May 2008 OTTAWA: INFLATION SEEN RISING
A report by the Canadian Imperial Bank of Commerce foresees higher inflation and higher Bank of Canada rates to counter it. The report says that the current low inflation rate of 1.4 per cent is the result of the rapid appreciation of the Canadian dollar but will cease to be a deflationary factor by September. According to CIBC, inflation also was reduced by the federal government's one-per cent decrease of the Goods and Services Tax. However, the document cites "unrelenting pressure" on food and energy prices which it says will find their way into the consumer price index and which will cause inflation of more than three per cent. The development that will force the central bank to hike interest rates. The analysis conflicts with the Bank of Canada's own evaluation, Gov. Mark Carney having predicted last week that inflation would remain under the two-per cent level until 2010.
Tuesday May 6, 2008 Economists differ on path of inflation, rates
Canadians should brace themselves - and investors should position themselves - for higher inflation and interest rates, ... CIBC's Rubin says they're headed up. Scotiabank sees things going the other way
Wednesday 30 April 2008 Fed Cuts Rate by a Quarter Point, to 2%
The Federal Reserve reduced short-term interest rates for the seventh time in seven months, the latest in a series of measures to stabilize financial markets.
Wednesday Apr 23, 2008 Bank of Canada on the defensive
The Bank of Canada cut its benchmark lending rate to three per cent yesterday as it moved to defend against a sharply slowing...
Tuesday 22 April 2008 Bank of Canada lowers target for overnight rate to 3%
NEW YORK (MarketWatch) -- The Bank of Canada on Tuesday said it is lowering its target for the overnight rate by 50 basis points to 3%, with the bank projecting a "deeper and more protracted slowdown in the U.S. economy." The bank forecast the Canadian economic would grow by 1.4% this year, and 2.4% in 2009.
Wednesday 16 April 2008 U.S. Economy
"I guess I've always lived the glamorous life of a star. It's nothing new - I used to spend down to the last dime." - Freddie Mercury. Standard and Poor's warned that Fannie Mae (FNM) and Freddie Mac (FRE) could cause the U.S. to lose its triple-A rating if the government were forced to rescue them. These government sponsored enterprises enjoy implicit government guarantees. S&P wrote, "Even though...credit damage from GSEs is unlikely, the greater risk to the U.S. lies with them than with broker-dealers." The cost in such an event could be as high as 10% of GDP (about 2.5x the annual U.S. defence budget)
while the Fed's bailout of Bear Stearns (BSC) and other credit facilities to brokers has cost less than 1% of GDP. Freddie and Fannie have been expanding their exposures to housing of late, adding to the risk. "These potential risks are not a prediction, but a risk worth mentioning," said S&P.
TORONTO: FACILITATORS OF DEBT MESS GET EXTENSION
The committee that is trying to make more than $32 billion of stranded debt eventually liquid has received from a court a 45-day extensions for its efforts to reach that goal. The court granted the extension to the Pan-Canadian Investors Committee for Third-Party Structure Asset-Backed Commercial Paper. The extension prevents lenders from foreclosing or suing while the restructuring process remains underway. The $32 billion of short-term commercial notes became frozen last August as a result of global credit crisis that originated in the U.S. mortgage sector. The committee headed by Toronto lawyer Purdy Crawford is proposing that the short-term debt be exchanged for new notes that won't mature for years. The noteholders will vote on the plan on April. At least one-half of them must accept for the plan to be implemented and these must represent at least two-thirds of the value of the debt.
Thursday Apr 3, 2008 More rate cuts likely, Jenkins says
More interest-rate cuts might be necessary to buffer Canada from the impact of the U.S. economic slowdown, according to ...
Friday 28 March 2008 February Spending Flat, Inflation Threat Recedes
Consumer spending grew at the slowest pace in more than a year in February, as the housing slump and a weak job market continued to put pressure on pocketbooks.
Wednesday 19 March 2008 WASHINGTON: FED SLASHES LENDING RATE
The U.S. Federal Reserve has again acted to neutralize the ongoing global credit crisis and to stimulate a slowing economy by cutting its key interest rate by three-quarters of a percentage point to 2.25 per cent. The central bank also reduced its discount rate for direct loans to banks to 2.50 per cent. The Federal Reserve explained that it is responding to a slackening in consumer spending and soft labour markets. The central bank acknowledges, however, that the tightening of credit conditions and the worsening of the housing crisis are likely to continue over the next several quarters. The actions in Washington give the Bank of Canada a further opportunity to reduce its own lending rate, which now stands at 3.75 per cent. Canada's central bank cut the rate by half-a-point on March 4 and by a quarter-point in January. The next opportunity for the Bank of Canada to attempt a similar economic stimulus would fall on April 22.
Many economists believe the US economy is already in recession
The Federal Reserve has cut US interest rates sharply in an attempt to restore confidence to nervous financial markets and boost the ailing economy.
The central bank lowered rates to 2.25% from 3%, but the cut was smaller than financial markets had expected.
Many economists believe the US economy is already in a recession.
Saturday Mar 15, 2008 In the markets, pessimism is a reason for optimism
"Buy when there's blood in the streets" is a piece of investment wisdom often attributed to the legendary Rothschild banking...
Monday, March 10 Sun has set on banks' golden age, firm says 25 years of unprecedented prosperity. Financial sector faces much leaner times, Montreal's Bank Credit Analyst predicts
Tuesday 04 March 2008 Bank of Canada cuts rate half a percentage point to 3.5 per cent
The Bank of Canada slashed its benchmark interest rate by 50 basis points to 3.5 per cent on Tuesday, in an aggressive move to buffer Canada from a U.S. economy likely in recession. It is the bank's first cut of more than a quarter percentage point since late 2001. It was Mark Carney's first decision since taking the helm of the central bank last month and it was a nail-biter. While economists were sure interest rates were going down, they were evenly divided over whether the bank will slice a quarter of a percentage point or half a point, polls showed.
The bank said in a statement though economic growth and inflation was in line with expectations, "there are clear signs that the U.S. economy is likely to experience a deeper and more prolonged slowdown than had been projected in January.
"The deterioration in economic and financial conditions in the United States can be expected to have significant spillover effects on the global economy."
The central bank reduced borrowing costs by a quarter point in December 2007 and again in January.
Thursday Feb 28, 2008 No capital-gains relief any time soon: Flaherty
Investors could be waiting some time for the federal government to deliver on its 2006 election pledge to reform capital...
Thursday Feb 28, 2008 Economic dangers trump inflation in U.S.
After months of squabbling by economic commentators over whether the U.S. should be more worried about inflation or stagnation...
Thursday Feb 28, 2008 Paying down the debt is the right move
There's a theory going around: The Conservative government should not have dumped $10 billion, the vast majority of Ottawa's 2007-08 surplus, into paying down the national debt.
Ottawa in danger of slipping into red
Warnings that the federal government finances could slip back into the red for the first time in a decade mounted yesterday...
Why we cut the debt
On Tuesday, Finance Minister Jim Flaherty presented his federal budget for the fiscal year starting April 1. Some opposition MPs and commentators complained that by using most of the surplus from this fiscal year to pay down Ottawa's debt, Flaherty had missed an opportunity to spend the money, instead, in various ways.
Thursday 21 February 2008 TORONTO: ONTARIO, OTTAWA CONTINUE WAR OF WORDS
Federal Finance Minister Jim Flaherty has repeated criticism of Ontario, accusing its Liberal Party government of "lack of leadership and vision," a state of affairs which he says is costing jobs. Mr. Flaherty repeated his suggestion made last Friday that the provincial government cut corporate and individual taxes as a way to stop the hemorrage of manufacturing jobs and to create new ones. The minister spoke in a speech to the Canadian Federation of Independent Business, an event attended by Ontario's economic development minister, Sandra Pupatello, who called Mr. Flaherty's remarks "bold-faced lies." Mrs. Pupatello added that Ontario has created jobs despite manufacturing losses without any help from the federal government. The provincial minister noted that Mr. Flaherty, a former Conservative Party finance minister, left Ontario with a huge deficit and then ended up in the same job in Ottawa, where he found a massive surplus due to the previous federal Liberal government.
OTTAWA: INFLATION DOWN
Inflation dropped in January to 2.2 per cent, down from 2.4 per cent in December. The Bank of Canada's core inflation rate in January stood at 1.4 per cent. That rate, which excludes eight of the most volatile items of the economy, is at its lowest level since July 2005. Analysts says the latest figures give the central bank leeway to continue to lower its interest rate. The Bank of Canada lowered the trend-setting rate by one-fourth of a percentage point in January.
Tuesday Feb 19, 2008 Depth of rate cut the question
The Bank of Canada has to weigh strong domestic demand against the spillover effects of the slowing U.S. economy when deciding...
Wednesday 30 January 2008 US rates cut to avoid recession The Federal Reserve has cut interest rates for the second time in nine days as it tries to keep the US economy from entering a recession.
The central bank lowered rates to 3% from 3.5% after a two-day meeting. Last week, the Fed slashed the cost of borrowing by the largest amount in 25 years in a shock move to calm tumbling global stock markets.
Tuesday 22 January 2008 credit-suisse We expect an additional 50-basis-point cut at next week's January 29-30 FOMC meeting, slicing the funds rate down to 3.0%.
We also anticipate at least another 50 basis points of easing by mid-year, bringing the funds rate down to 2.5%.
Friday 18 January 2008 Global inflation A delicate condition
Global inflation is rising even as the world economy is slowing. How much should policymakers worry?
TORONTO: EXEC SAYS MORTGAGE CONDITIONS SHOULD IMPROVE
The chairman and chief executive of Xceed Mortgage Corp. (TSX:XMC), a non-traditional mortgage lender, said Thursday troubling conditions in the mortgage industry should begin to subside this year despite expectations that the economy will continue to slow. Ivan Wahl give the assessment in a quarterly conference call. The Toronto-based firm has struggled amidst tumultuous market conditions that helped send it spiralling to a full-year loss of $4.5 million from a year-ago profit of $22 million, mostly due to a big fourth-quarter writedown. The writedown occurred after the agent for a trust holding Xceed's mortgage securities as assets announced in August it was unable to find investors interested in rolling over the trust's asset-backed commercial paper as it matured. Xceed said its annual loss for the year ended Oct. 31, 2007, amounted to 16 cents a share, contrasting with earnings of 74 cents per share in the previous fiscal year. Mr. Wahl said he remains confident that Xceed could overcome its financial troubles.
Thursday 10 January 2008 For Bernanke, a Question of Toughness Many argue that with the stock market falling and the economy flirting with recession, the Fed’s chairman should be more aggressive than he has been so far.
2007
Stephen S. Poloz VP EDC Economics Weekly Commentary Surprise of the Year: Deflation Dissipation - December 19, 2007
Each year, just before the holidays, we take a look back and recall the surprises that took place in the previous 12 months. 2007 was loaded with candidates.
Start with the world economy. We began the year with the world in decent shape, but concerned that the U.S. housing sector could surprise on the downside. Downside surprise indeed! Despite repeated reassurances from policymakers, the U.S. housing sector went into a meltdown and there is no evidence to suggest that it is over. The erosion of consumer confidence is affecting the rest of the economy, and economists are now open to the possibility of a U.S. recession. Past issues | his WN page
Commentary podcast.
Thursday 20 December 2007
The credit crunch
There is certainly a path out of the gathering banking crisis, but no guarantee that the world economy will find it ... more
America's Federal Reserve, the European Central Bank, the Bank of England and the central banks of Canada and Switzerland launched a co-ordinated effort to bolster liquidity. After several months of turmoil, financial institutions are still reeling from the squeeze in money markets and access to credit has tightened. The Fed and its partners are introducing loans to depository institutions for a temporary period to ease their funding pressures. more
Tuesday Dec 11, 2007 Hot dollar sparked bank's rate cut
A loonie in the mid-to-upper 90-cents (U.S.) range is more in keeping with historical norms and Canada's terms of trade than the recent record high of $1.10 U.S., which required some offsetting tweaking of monetary policy, David Dodge, governor of the Bank of Canada, said yesterday.
Monday 10 December 2007 Why credit spreads revert to the middle PERHAPS the biggest change in the debt markets over the last 20 years is described by the ugly world “disintermediation”: banks have been replaced as the providers of finance. Instead, borrowers are seeking money directly from the capital markets (albeit with banks usually acting as arrangers).
Wednesday 05 December 2007 OTTAWA: CENTRAL BANK LENDING RATE DROPS
The Bank of Canada has cuts its key interest rate by a quarter point to 4.25 per cent, which caused an immediate drop in the value of the currency. The bank says the reduction is based on lower inflation and worsening economic prospects. Inflation is down below two per cent, due partly to the strong Canadian dollar pushing down prices domestically. The bank says while the Canadian economy remains strong, a slowing U.S. economy is expected to hinder Canadian economic growth. After the bank's announcement, the dollar fell 1.2 cents from Monday's close to US 98.78 cents. The soaring loonie has caused considerable hardship in the manufacturing sector concentrated in central Canada. Jason Myers, the president of the Canadian Manufacturers and Exporters lobby, says that if the Canadian dollar had remained above parity for any longer, it could have caused as many as 50,000 layoffs by June.
Nov 12, 2007 Performance-pay Perplexes
The havoc on Wall Street following the collapse of the subprime-mortgage market boils down to a simple truth: for years, lots of very smart people took lots of very foolish risks, betting borrowed billions on dubious mortgage derivatives, and eventually the odds caught up with them. But behind that simple truth is a more surprising one: the financial whizzes made bad decisions in part because that’s what they were paid to do.
Tuesday 23 October 2007 OTTAWA: INFLATION JUMPS
Statistics Canada reports that inflation jumped in September by 2.5 per cent due chiefly to higher gasoline prices. The figure for August was 1.7 per cent. However, "core" inflation, defined by excluding volatile items precisely like gasoline or fresh fruit, was down at two per cent, the target which the Bank of Canada scrutinizes in deciding whether to adjust its lending rate.
Wednesday 17 October 2007 OTTAWA: CENTRAL BANK RATE UNCHANGED
The Bank of Canada has elected to leave its trend-setting lending rate unchanged at 4.5 per cent. The central bank explained that although inflation has been above its target of 2 per cent at 2.2. per cent so far this year, consumer inflation fell to 1.7 per cent in August. The Bank of Canada also cited slow growth in the U.S. and the effects of the high Canadian dollar. The next occasion for the central bank to raise is rate will be Dec. 4.
Tuesday 11 September 2007 OTTAWA: FEDERAL DEBT RATING MAINTAINED
Moody's Investors Service has declared that Canada continues to deserve its top Aaa debt rating in the Service's annual report on the country. The report predicts that Canada will continue to benefit from high oil prices, noting that the unemployment rate is the lowest since the early 1970s, with inflation remaining low as well. Moody's also gives the federal government credit for using budget surpluses prudently by paying off the national debt, thus freeing up funds do deal with problems common to industrialized democracies, such as health care and the aging of the population. The agency says Canada's economy could suffer from the economic downturn in the U.S. but nonetheless predicts growth of 2.4 in 2007.
Wednesday 05 September 2007 Central bank holds steady on interest rate Ottawa — The global credit crunch has shoved the Bank of Canada to the sidelines, prompting the central bank to hold its key interest rate at 4.5 per cent.
Tuesday 21 August 2007 OTTAWA: FM WARNS OF REPERCUSSIONS OF FINANCIAL TURMOIL
Canada's minister of finance says last week's turmoil in global financial markets could have a modest effect on the country's economy. Jim Flaherty says stability seems to have returned to the market this week after last week's losses on the Toronto stock market and other world markets. However, Mr. Flaherty says it will take time for the increased cost of borrowing money to resolve itself. Last week, Canada's central bank injected large amounts of cash into the market and tightened its standards for borrowers. The selloff of stocks in the markets last week was caused by an increase in the rate of mortgages in the United States given to customers with poor credit history.
Sunday 19 August 2007 How Missed Signs Contributed to a Mortgage Meltdown
By NELSON D. SCHWARTZ and VIKAS BAJAJ
There were ample warning signs that a financial time bomb in the form of subprime mortgages was ticking quietly for months.
Wednesday 15 August 2007 TORONTO: U.S. MORTGAGE CRISIS MAKING RIPPLES IN CANADA
Investment firm Coventree Inc. says its banking lenders are reluctant to provide funds to cover its short-term notes. Coventree and other Canadian investment houses are seeking to activate liquidity agreements intended to shield them from market disruptions. The situation is a repercussion from the subprime mortgage crisis in the U.S. Coventree shares fell 72 per cent before trading in them was halted at $2.67 in Toronto late Tuesday afternoon. The shares fell by $4.48 on Monday from $12.98 before the company's problems became known. Coventree owns about 10 per cent of Sceed Mortgage Co. and vouches for some of that firm's non-traditional mortgages. Xceed's own stock plunged on Tuesday for the second straight day.
11 August 2007 OTTAWA: CENTRAL BANK MOVES AGAINST CASH SQUEEZE
Concerns over a scarcity of credit and a cash squeeze are reinforcing each other in world money markets. Following the example of the U.S. Federal Reserve and the European Central Bank, the Bank of Canada injected cash into the banking system to promote stability and the proper functioning of the financial system, after the cash squeeze in the U.S. caused by a crisis involving subprime mortgages. Canada's central bank injected more than $1.5 billion into the system as markets opened Friday morning. On Thursday, the bank had injected $1.64 billion.
Wednesday 08 August 2007 Fed Leaves Rate Steady; No Sign of Future Cut
The Federal Reserve Tuesday largely sidestepped the growing anxiety over how tightening credit standards will affect the economy.
Wednesday 11 July 2007 OTTAWA: CENTRAL BANK RATE UP
The Bank of Canada has raised its trend-setting lending rate by one-quarter of a percentage point to 4.5 per cent in the central bank's first increase of the rate for more than one year. The bank explained that the combination of stronger-than-expected economic growth and inflation dictated the increase. The central bank says it expects inflation to remain above its tolerated level of two per cent until early 2009, and that therefore another rate increase may be necessary on Sept. 5. The Bank of Canada says that its rate increases and the high Canadian dollar will slow economic growth to an average of 2.5 per cent in both 2008 and 2009.
Friday 06 July 2007 Debt-ridden Canadians vulnerable to higher rates
Bankruptcies may rise: Economist. Full-percentage-point hike seen as critical ...."The Bank of Canada will not take interest rates too high because it knows it would be risking taking the consumer down," he said.
Also, the dollar will probably rise as rates do, acting as a dual-braking system on the economy and inflation, he added.
Thursday 05 July 2007 rci OTTAWA: HIGHER INTEREST RATES FORECAST
The Bank of Montreal predicts that the Bank of Canada will raise interest rates twice this summer and that after the second increase on Sept. 5 it will stand at 4.75 per cent. The BMO's report says that although economic growth slowed in April, it will have gained sufficiently in May to arouse the central bank's apprehensions regarding inflation. BMO's economists also predict that the rate increase could jolt the Canadian dollar as high as US96 cents. The Canadian currency rose .16 of a cent on Wednesday, closing at US94.46 cents, its highest level since June 1977.
Tuesday 05 June 2007 U.S. stocks fall sharply as Bernanke, data weigh on bonds>
NEW YORK (MarketWatch) -- U.S. stocks finished sharply lower Tuesday, after upbeat comments on the economy from Federal Reserve Chairman Ben Bernanke and better-than-expected service-sector data reduced hopes that the Fed would cut interest rates and lifted bond yields to challenging levels. See full story.
Monday 04 June 2007 Heavy bondage ALTHOUGH the S&P 500 index has just recorded an all-time closing high, bond investors are not celebrating. The 30-year Treasury yield has moved above 5% for the first time since last August, and ten-year yields have been pushed sharply higher in Germany and Britain.
There is some concern that the end of the bull market in equities may be approaching. However, predicting the date and time of the last gasp remains difficult. Our Wednesday Night technician points to the decennial history of the market in years ending in seven from 1887 to the present, each indicating, without exception, a decline ranging from nine percent in 1947 to forty percent in 1937. Cautious investors should be afraid, but at least one market guru believes that whilst we have turbulent times ahead, the time is not nigh for the end of the bull market. The fundamentals are still good. It’s right to be cautious for the present time. In 1929, the crash occurred on September 21 and on September 20 of that year, President Hoover declared that the health of the American economy was never better.
[Editor's note: while we generally avoid disputing any facts advanced on Wednesday Night related to the stock market, we must put in our two cents – a small investment: the crash actually occurred in October of 1929, more precisely on October 28 and 29 see: stock-market-crash.net/1929.htm ]
A new phenomenon (and new term to many) is America's subprime-mortgage market, which is the subject of much media coverage that has dented investor confidence again. The Mortgage Bankers Association reported a rise in mortgage defaults and activity in home foreclosures in this market, which lends at a 2-3% premium to borrowers with weak credit.
Saturday, January 27, 2007 Jay Bryan, Productivity woes likely to hold back economy -- for now
MONTREAL -- Up until a few weeks ago, financial analysts were expecting to see interest rates falling in the early part of this year. Their reasoning was that a North American economic slowdown, linked largely to a slump in U.S. housing, was squelching inflation pressures and we needed a little boost to growth.
2006
Thursday 28 December 2006 MONTREAL: ECONOMIST SEES INTEREST RATES DROPPING
Laurentian Bank's chief economist is predicting lower interest rates in Canada this spring to counter what he calls a "significant" economic slowdown. In an economic outlook from Canada's sixth-largest chartered bank, Carlos Leitao said Wednesday the lowering of interest rates "should be seen more as an insurance policy against a deeper slowdown rather than the start of a new easing cycle." He said the Canadian economy is in the midst of "a significant slowdown that we still think should be relatively short-lived. Nevertheless, the downside risks are important and far outweigh upside risks."
Thursday 09 November 2006 Bank of England hikes key rate to 5% from 4.75%
LONDON (MarketWatch) -- The Bank of England on Thursday lifted its key interest rate to the highest level in more than five years in a pre-emptive step to curb wage inflation and rapidly climbing house prices. As expected, it moved its base rate to 5% from 4.75%
BBC
Stephen S. Poloz
