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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bullwhip29
Guest
bullwhip29

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

so, what do they know that we all don’t?

MikeS
Member
MikeS

Fuck this guy. What a Dovish piece of shit.

Many Franks
Member

Bank of Canada interest rate drop may boost Vancouver housing market:

“That should provide a nice little potential boost for the housing market, not just in Vancouver but the rest of British Columbia as well,” said Bryan Yu, senior economist with Central 1 Credit Union.

[…]

Vancouver mortgage broker Michelle Byman said if lenders cut their rates, a quarter point change won’t make a big difference.

“It will help people that are buying,” said Byman. “But I don’t think that’s going to fuel anything more than what’s already going on in the market.”

…which is unmitigated insanity.

Chinoise
Guest
Chinoise

This is a politically motivated cut IMO. The election is coming up and everything has to be goosed up so that Harper can get back in. No thought as to what this does for those who were prudent and are on fixed incomes.

Now they have to face zero returns unless they go back into the Bay street gambling house, and watch their savings be at the mercy of the Wall Street casinos. They will also face higher inflation from imported food.

But Poloz couldn’t give a damn. he just follows the Greenspan, bernanke, Yellen money whores.

Westside Realtor
Guest
Westside Realtor

Many Franks,

I agree with your last point.

I also think debt levels will swell further. People thinking of dumping cash flow negative condos may hold on a bit longer.

Let’s see what comes if/when the US raises rates or when oil firms up.

I expect that imported goods will shoot up on price, and the BoC will get the inflation they so desperately covet.

Won’t stop the weakness for westside sfh’s imho.

WSR

what is it?
Guest
what is it?

We have been inculcated that low rates are bearish, when actually they are meant to be bullish – to do exactly what the government wants us to do. Stocks and assets are rising, disposable incomes diminishing, CPI contained and inflation remained flat, but taxes and govt costs continue rising. If this is not stagflation, what is it by any other name?

space889
Guest
space889

Some European government debts are negative in yield all the way out to 5 or 7 years on the curve, so yeah, interest rate can fall a lot farther, especially if negative deposit rate gets implemented.

Imagine having to pay a $15/month account fee + negative 0.5% on all desposits in savings & chequeing account at bank…that would pour fuel on the fire to borrow and spend, spend, spend….

Mortgageslave might really below his head in that scenario too, what with how it’s unfair his friends can live it up while he’s being all responsible and denying pleasure.

As I said, right now savers are indirectly paying spenders fun. It’s not fair but that’s reality and reality don’t give a f about fairness.

space889
Guest
space889

@what is it? – I think a lot of taxes like income tax, property tax, translink levy, etc are actually excluded from CPI calculation to a large extent, and so much of it invisible that people really don’t see the insidious impact it has. Add in all the red tape and wasted beauracracy, the government parasite is really sucking a lot of the private sector host. That is unlikely to change however.

Case in point, the transit link tax increase. I can’t believe a poll shows 46% of people supporting it!!! I really wonder how they got that number. At this point I honest believe that even if 75% of voters voted no to the referendum, the government will simply announce that the YES side pass with some made up % of yes vote.

history
Guest
history

Last week a relative gifted me a new (used) van. It just keeps getting unambiguously better and better. My new ‘home’ is 9 years younger than the old ‘home’, and much more fuel efficient, to go with $0.95 gas price.

space889
Guest
space889

Lastly, why the hell is 2% inflation so good?? Economist really have a warped mind. Everyone knows that iPad price or that 70″ thin LED TV price is going to drop next year and the year after that with even more bells and whistles, yet they are still being bought! Price deflation isn’t exactly preventing/stopping people from buying.

Frankly, we really need some serious deflation in taxes, government red tape/nanny state, and healthcare costs.

pricedoutfornow
Guest
pricedoutfornow

I know there are many, many people who live in the Okanagan and do the “2 week on, 2 week off” kind of schedule to go work in the oilfields. I personally know of about 25-30 of these people, but I imagine there are thousands of these guys who fly out every couple weeks to the Fort Mac or wherever. I would imagine that if these guys are laid off (apparently some have, as projects have been deferred), this is going to have a serious impact on the economy in the Okanagan. There aren’t too many well paying jobs there, nothing like the work these guys get(yes, most often they’re trades guys) and the nice wages that go with them. Ouch. I wouldn’t underestimate the value of these oil jobs to the economy in the interior.

nufio
Guest
nufio

ha ha ha like i said they will NEVER raise rates! I am still bearish on vancouver RE irrespective of boc rates.

bullwhip29
Guest
bullwhip29
@ #3 i’m sure the lead story on global news tonight will be the BOC rate cut and how the move will re-ignite the vancouver housing market. but, but, wait…i thought housing prices were soaring with no signs of a pullback whatsoever? so, WTF is going on? @ #10 with the RE market effectively being “too big to fail” i am not the least bit surprised by today’s move. that said, the BOC’s about face is a sign of weakness that could ultimately send a chill through the markets. throughout all the minor ups and downs of the last few years, they deemed things to be dire enough to warrant todays surprise int rate cut. a serious housing correction which leaves 100’000s if not millions of Cdn homeowners severely underwater would have even a bigger impact on the economy than… Read more »
history
Guest
history

To a Central Banker, ‘insurance’ is gold, the metal… in the vault, deep storage.

what is it?
Guest
what is it?

@#11 – plus I saw that rate-cut coming too.

@#8 – I’ve been a bear since VHB’s time. If a rent-free van works, great stuff. Instead of that dream house on the westside, most start at one’s comfort zone to build up the nest egg.

@#7 – I merely took the opportunity to rant. I’d seen it coming and have invested prudently.

Dave
Member
priceoutfornow, I spend a fair bit of time in the Okanagan and I pay attention to what’s going on. For example, Britco was booming in Penticton because they were building temporary housing and offices for use in the North. That’s the kind of business that gets hit the worst because the demand for product can drop to zero. None of these people work in the oil patch, but let’s not kid ourselves, those are oil patch jobs. Another example is real estate and construction. Fewer Albertans buying homes means less building. It also means the real estate market there stagnates which impacts all the related jobs. Like I say, Westjet said 5,000 people work in the oil patch. I bet the real number of oil related jobs is more than double that in the Okanagan. If you are an oil… Read more »
patriotz
Member

@111 previous:
me:“In fact the US takes in twice as many legal immigrants as Canada, including twice as many from China”

“Patriotz, you are trying to deceive people here. USA has 10 times the population. So having twice as many immigrants being accepted there means??”

It means exactly what I said – more people want to immigrate to the US than to Canada. What does the relative size of those 2 destinations have to do with that fact?

patriotz
Member

http://www.cbc.ca/news/business/bank-of-canada-shocks-markets-with-cut-in-key-interest-rate-1.2921370

On Wednesday evening, TD Bank confirmed to CBC News that it will not be lowering its prime interest rate in tandem with the Bank of Canada’s overnight rate.

history
Guest
history

this is my esoteric message to the gnomes reading this forum, i KNOW the shiet is about to hit the fan… here it is, from Bobby Gimby’s ghost.

CA-NA-DA
(One little two little three Canadians)
all taking the dive
(Now we are thirty five million)
CA-NA-DA
(Four little five little six little Provinces)
Proud slave
(Now we are ten and the Territories cave to cave)

(Chorus):
North south east west
There’ll be sad times,
margin Bells will ring, ring, ring
It’s Sedna conjoining of Algol
and Medusa’s head is severed!

bullwhip29
Guest
bullwhip29

@ #15
today’s move was about keeping the big elephant in room, the debt boogieman, at bay. nothing more. other measures could have been implemented to buoy the oil sector specifically, but the powers that be thought cutting rates would give them the best bang for their buck. in cities like Vanc, RE is the only game in town. obviously, RE prices in Alta are teetering on the edge as we speak. a serious RE correction/crash nationally would reek havoc on the financial sector out east. the exercise today was about preventing the first domino from tipping over and maintaining the illusion that Canada is not susceptible to a US style housing collapse.

@Patriotz #17
Guest
@Patriotz #17

“On Wednesday evening, TD Bank confirmed to CBC News that it will not be lowering its prime interest rate in tandem with the Bank of Canada’s overnight rate.”

This was decided over a private conversation last week. Who do you think runs the BoC? The Big 5 do.

It”s all about housing and earning interest on debt.

Westside Realtor
Guest
Westside Realtor

Great post Dave/15.

I know some folks here that do the fly in/out. Hard to see how the oil co’s won’t hop those jobs Toute suite.

And I totally agree on the ancillary impact, it is going to be huge.

WSR

|Boombust
Guest
|Boombust

#18…

I remember that Bobby Gimby 1967 Centennial song very well!

ostritch
Member
ostritch

No matter what, Garth has a way to spin this so he was right all along.

If interest rates go down, it’s deflation and bad for assets (but not equities that are assets somehow)

If interest rates go up, it’s great for financial assets but not real estate.

@Ostrich Post 23
Guest
@Ostrich Post 23

Garth has just been proven wrong. This has been happening since 2009, 2010, 2011, 2012, 2013, 2014, 2015.

I feel sorry for his followers. But he has them by the mental balls. Now he will say it won’t end well in 2017 or 2019 or something like that. Going forward, it is clear to everyone but him that demographics and high house prices will not allow rates to increase for the next decade at least.

On a separate note, he does to ‘good’ business with the banks.

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