Interest Rates

It is disappointing that the Bank of Canada left the Bank Rate unchanged today at 3%. Many economists had expected a quarter point interest rate cut today, on top of the half point cut announced on April 22nd.

The job market has clearly continued to weaken over the past two months because of the high Canadian dollar and the manufacturing and forestry jobs crisis.

Recent data show that Canada’s economy shrunk by 0.1% in the first quarter, indicating that we may well have entered a recession. Economic growth in the first quarter was even weaker than in the US.

The labour force data for the past two months – not available when the Bank of Canada last set interest rates – show that we have lost 12,000 full-time jobs since March, and that the number of unemployed workers has risen by 18,000.

Most disturbingly, the youth unemployment rate has jumped from 11.0% to 11.9% showing that jobs are now getting very hard to find for those entering the labour force or losing their current jobs.

Meanwhile, the core inflation is running at 1.5%, well below the Bank of Canada’s 2% target, and there are clear signs of a further weakening of exports and the housing market.

2 comments

  • Given the quarterly data on GDP, one would have thought it was more of a question of whether we would see more than a .25% cut. Looks like we have an even more inflation hawkish regime in place now.

    that is really to bad for workers, just when you thought that oil to our dollar relationship was weakening and one could see an opening with a healthy rate cut to bring down the dollar a bit further.

    paul

  • Is there actually no connection between Carney’s interest rate announcement and the House of Commons action in passing Bill C-50 Amendments to the Bank of Canada Act the day before ?

    We need commentary on the fact that Carney is likely to have a free hand now, after Royal Assent, to “buy and sell any securities or any other financial instrument” and post his day trading to the Gazette only when he sees fit.

    There should be no ‘surprise’ as CBC reports on Carney’s move. Financiers have what they want, the party’s on again, and with no regulation in sight.

    L

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