BOC chops rate in race for bottom

If you’ll recall you’ve been warned many times by a number of government talking heads that rates could go up at any time.

Today the Bank of Canada finally took action and cut rates by a quarter from 1% to 0.75%.

Speaking to reporters, Mr. Poloz said the oil price drop is “unambiguously bad” for the Canadian economy, prompting the bank to take out what he called an “insurance policy” against future risks, such as weak inflation and a household debt squeeze. But he denied the move was calculated to send the Canadian dollar lower.

“Market consequences will be what they are,” he said.

The rate cut sent the loonie plummeting below 81 cents (U.S.).

Mr. Poloz, who acknowledged that oil dominated the bank’s discussions leading up to Wednesday’s rate decision, said he’s ready to cut rates again if prices fall further.

“The world changes fast and if it changes again, we have room to take out more insurance,” he said.

The rate move, which few analysts anticipated, is an attempt by Mr. Poloz to shield highly indebted Canadian households from an oil-induced hit to their jobs and incomes – signs of which are already evident in Alberta.

In the comments section here, Dave asked the question: How much of the BC economy is tied to Oil and Alberta?

I would like to know how much of a hit the damage to Alberta will be to BC. It seems to me that everybody underestimates the economic impact. I think our statistics don’t capture the role of Alberta in our economy. I think I read that Westjet estimated 5,000 people in the Okanagan work in the oil patch. And that’s just them trying to estimate things for their benefit (i.e. people who buy plane tickets). How many work from home on their computers? Or only make a few trips per year and don’t get picked up the radar? How many work in the Okanagan but for companies that service the oil patch? Add it all up and there is a LOT of employment related to Alberta.

 

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[…] top of the Bank of Canada recent surprise .25% rate cut there are a number of people predicting another cut coming this year, so why worry about interest […]

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I quite like reading a post that will make men and women think. Also, many thanks for allowing me to comment!|

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[…] growth worst in Canada -Why rate cut may not drop mortgages -Bankers keep filling the punchbowl -The Okanagon oil link -The British Columbia oil link -Recession? Again?! -Owners ask for reduced valuations […]

Mortgageslave
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Mortgageslave

http://www.caodc.ca/media-room/press-releases/oil-drillers-buckling-prices-decline

“CAODC also projects that decreased drilling activity will hurt employment in the oil patch, resulting in the potential loss of approximately 3,400 direct jobs and up to 19,500 ndirect jobs relative to 2014. Total net job losses (direct and indirect) could reach as high as 23,000 compared to last year.”

patriotz
Member

@68:

It should be obvious that since so many of our consumer goods are priced in USD, the fall in CAD will in itself prevent deflation in consumer prices.

What isn’t priced in USD? Real estate. That’s the deflation they are trying to stop.

bullwhip29
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bullwhip29

@ #69

central banks around the world (not just here) are doing whatever they can to ward off DEFLATION and a diminishing wealth effect, which Japan has had to deal with for 20+ years. supposing that all nations are passengers on the titantic, it makes little difference if one was to move from one cabin to the another with maybe a better view even if it is discounted.

Bull! Bull! Bull!
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Bull! Bull! Bull!

@66

>GO ham GO! Cheer away. They don’t drive this market.

and if housing doesn’t correct in 2015 despite despite a low dollar what will you conclude that HAM does drive the market?

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

>Cost of everything will go up, income down, lots of layoffs. Nothing at all bull. FYI, people are alredy maxed out.

oh, i see… this is the latest straw you people are hysterically grasping at.

btw, i don’t think 2015 is going to be a great year for real estate, but it has nothing to do with the dollar. it’s just the continuation of soft landing.

Marco
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Marco

@Patriotz

Thanks for the article:

“In most cases, deflation is deadly because it leads consumers to put off making purchases now in the belief that prices will go lower in the future. Deflationary traps are extremely difficult to exit, so preventive action must be decisive.”

Interest to 0%?

patriotz
Member
Mortgageslave
Member
Mortgageslave

@Bull! Bull! Bull!

Cost of everything will go up, income down, lots of layoffs. Nothing at all bull. FYI, people are alredy maxed out.

GO ham GO! Cheer away. They don’t drive this market.

Marco
Guest
Marco

“There’s as much as 30 million barrels sitting on floating storage, and it’s got to go somewhere at some point. That has to resolve itself,” said Eric Lee, Citigroup energy analyst.

Mortgageslave
Member
Mortgageslave

Equities soaring, dollar down. A great time to be all in on Equities and out of housing!

@space889 – not sure what you’re talking about regarding savers??? I’m Loving the rate cut. Mortgage rates stay the same and equities are the best game in town. Diversified portfolio up 1800% over the past 20 years. You can have your overpriced houses losers.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

and how will a low loonie negatively impact real estate?

bullwhip29
Guest
bullwhip29

@ #61
loonie cont to drop as oil makes another low

“if you’re not inside, you’re outside” ~ Gordon Gecko (1987)

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

Open-ended European QE starts ‘with a bang’

http://www.cnbc.com/id/102354830

Marco
Guest
Marco

@Craigster

Thanks for that.

Mortgageslave
Member
Mortgageslave

@Oracle

Let’s be clear on one thing Cheerleader. Corrupt Asian money has helped to prop up this market. LMAO at how pathetic the Bull argument has gotten. Bbbbbut, what about the HAM?
Again, common real estate agent scare tactics, The first time home buyer drives this market and they are priced out, bottom line. Cheer away Oracle, go ham, go! Zero chance of that.

Sure you have some offshore money buy houses here, but it will never be enough to drive the market, give you head a shake.

No Market continuously goes up, a healthy price correction is normal. Sorry to inform you that the time is now. I know you’re denying the HPI trend but it is negative and falling fast. In case you forgot.

bullwhip29
Guest
bullwhip29

@ #49
oil has not bottomed yet. neither has the loonie. i’m certain poloz and co (along with the gangster squad in davos) know more than what they are letting on. a second bailout of the Cdn banks will be a much tougher sell imho

Marco
Guest
Marco

@53 Southseacompany

Thanks for the article:

“The bank calculates that housing’s contribution to output would drop by 0.6 percent if oil prices stay at $60 a barrel through 2016, relative to $110, according to the policy report.”

The price of oil from the mid 80’s to 2003 was below $25. The uptick I would think was because of demand from China. Now that china is slowing all resource sectors are taking a hit.

Craigster
Guest
Craigster
@Marco – for the first time since WWII, the UK Cabinet met in Ottawa last year. This was not revealed to the media until after the fact. There is no doubt in my mind Canada is following the UK playbook – or possibly vice versa – the point is that middle class 45+ voters get their housing values protected and, from a Government perspective, they are able to continue to farm more tax through Land Transfer tax and property tax in its various forms at a time when corporation tax a) will not generate much income and b) is a no-no anyway as companies are struggling. The gulf between the rhetoric of the UK’s recovery and the reality on the ground for a lot of people is bigger than I can ever remember it. Let’s see if the same thing… Read more »
southseacompany
Member
southseacompany

“Canada surprise rate cut keeps housing party going” Reuters

http://ca.reuters.com/article/businessNews/idCAKBN0KU2W020150121?sp=true

“Hilliard MacBeth, an Edmonton-based portfolio manager at RichardsonGMP and author of “When the Bubble Bursts: Surviving the Canadian real estate crash,” believes the central bank’s concern could scare everyone out of the market.

“If they are so concerned they are cutting rates because they are worried about a recession, will that spread to homebuyers?” said MacBeth, whose view from Canada’s hard-hit resource sector takes in a lot of frightened consumers.

“All it takes is for them to see a neighbor lose his job … and they really change their attitude towards accumulating more debt.””

kabloona
Member
kabloona
Here we go…… 😉 “Mortgage rates to decline following central bank’s rate cut: economists https://ca.finance.yahoo.com/news/mortgage-rates-decline-following-central-banks-rate-cut-170957917.html By Alexandra Posadzki, The Canadian Press | The Canadian Press – 16 hours ago TORONTO – Canadian homeowners have likely gained a reprieve from an expected increase in mortgage rates this year. Economists were expecting rates to dip slightly in response to the Bank of Canada’s surprise move Wednesday to cut its trend-setting interest rate to 0.75 per cent, from one per cent, to soften the blow of dropping oil prices on the Canadian economy. “This signals that low interest rates will be with us a while longer,” said Avery Shenfeld, the chief economist at CIBC World Markets, noting that the central bank’s rate cut will likely mean a corresponding 0.25 drop in variable, or floating, mortgage rates. Fixed-rate mortgages are also likely to see… Read more »
southseacompany
Member
southseacompany

“Bank of Canada supports housing market with surprise rate cut”, BNN with video.

http://www.bnn.ca/News/2015/1/21/Real-Estate-Watch-Bank-of-Canada-supports-housing-market-with-surprise-rate-cut.aspx

“Canada’s soaring real estate market survived the 2008 financial crisis with barely a scratch. With a surprise rate cut, Bank of Canada Governor Stephen Poloz is trying to make sure it survives an oil price crash.”

Marco
Guest
Marco

Correction: Not all the Commenwealth Countries.