More interest rate cut coming - Canadian News ZT

Interest-rate cuts coming
Eric Beauchesne, Canwest News Service
Published: Sunday, October 19, 2008

OTTAWA -- With the plunge in energy prices and a rapidly weakening economy, inflation shouldn't pose any obstacle to further interest-rate cuts this coming week, and for some time to come.

But the Bank of Canada won't even wait to see the September inflation report, being issued Friday by Statistics Canada, before cutting interest rates further Tuesday, according to analysts who expect another cut of at least a quarter point.

Despite a surprise half-point reduction earlier this month, in co-ordination with reductions by central banks around the world, markets are pricing in at least another quarter-point reduction Tuesday.


"The global financial crisis has taken its toll on the Canadian economy, justifying the need for more monetary stimulus," Scotia Capital said Friday, noting that among other things "retail sales are now barely growing."

"The price of oil was cut in half from a record high of $147.27 in less than 100 days," it also said. "This has helped ease inflation pressure."

"In addition, the decline in oil prices is hurting the economic prospects of the energy-heavy Alberta province, a key factor for Canada's future growth prospects," it said. "Lastly, the benchmark TSX equity index is down about 40 per cent in the last four months, taking the economic pain from Bay Street, directly to Main Street."

The Bank of Canada will issue a brief statement Tuesday explaining its interest-rate decision, which will be followed by a more detailed explanation and update of its economic forecasts in its Monetary Policy Report on Thursday and at a news conference by bank governor Mark Carney.

"Look for the Monetary Policy to noticeably downgrade the outlook for Canadian economic growth, and clip the inflation projection," said BMO Capital Markets economist Douglas Porter.

Support for further rate cuts will likely also come from other domestic economic reports, including August wholesale sales on Monday, and retail sales on Wednesday, both of which are expected to have been driven down by both weaker sales, especially for autos, as well as lower energy prices.

The bottom line is interest rates are coming down.

"Inflation concerns have been trumped by the credit crisis and enhanced risks of a global recession," said CIBC economist Kirshen Rangasamy. "Declining energy prices should keep a lid on headline inflation over the rest of the year, and give the Bank of Canada ample room to provide further stimulus if necessary."

Don't bank on a quick retreat in inflation, however.

CIBC projects that prices edged up last month, leaving the inflation rate at 3.4 per cent, down only a notch from 3.5 per cent in August and still well above the Bank of Canada's two per cent target.

"Gasoline prices continued to trend lower in September, albeit at a slower pace," Rangasamy said, adding that downward pressure on inflation likely came from autos as well. "Those price declines should, however, be balanced out by higher prices for education, food and imported goods."

Despite a dearth of U.S. economic reports in the coming week, the eyes of most analysts, here and elsewhere, will still be focused on the U.S. looking, hopefully, for signs of at least some stability in volatile and deeply depressed stock markets.

The only major U.S. economic report doesn't come out until Friday, but it may contain a glimmer of hope, and from a surprising quarter, that country's devastated housing market, the source of the whole financial and economic mess that the world now finds itself in.

Indications are that there may have been a moderate two per cent upturn in sales last month, noted BMO Capital Markets economist Sal Guatieri.

"The good news is that home sales appear to have stabilized this year after sliding deeply the previous two," Guatieri said.

所有跟帖： 

• I always like interest rate cuts -cultuslake- ♂ (790 bytes) () 10/19/2008 postreply 15:41:01

• 我能体会有多高兴 : ))) -江城游子- ♂ (138 bytes) () 10/19/2008 postreply 16:55:43

• OMG，哪有这样砍的！ -cultuslake- ♂ (34 bytes) () 10/19/2008 postreply 17:19:15

• 呵呵呵、、、俩位兄弟能否带上俺同乐哈！ -小小石头- ♂ (0 bytes) () 10/19/2008 postreply 17:43:32

• 石头最高兴 !!! -江城游子- ♂ (0 bytes) () 10/19/2008 postreply 17:46:46

• co：石兄最高兴 !!! -cultuslake- ♂ (10 bytes) () 10/19/2008 postreply 17:48:30

• 澳洲利息可能最高 -江城游子- ♂ (43 bytes) () 10/19/2008 postreply 17:45:21

• 够高的 -cultuslake- ♂ (52 bytes) () 10/19/2008 postreply 17:49:57

• 米国可怜，已经1.5%没啥好砍了。 -小小石头- ♂ (0 bytes) () 10/19/2008 postreply 18:07:28

• 1.5% 不是prime，米国prime现在是4.5% -cultuslake- ♂ (0 bytes) () 10/19/2008 postreply 21:04:01

• 江兄最近又添了几栋房子？ -QinHwang- ♂ (0 bytes) () 10/19/2008 postreply 18:21:32

• 问教授好! 还是房事比较安全。 -江城游子- ♂ (495 bytes) () 10/19/2008 postreply 20:15:37

• 从长远看RE还是比较稳当。希望那块地将来能给你赚大钱 -QinHwang- ♂ (0 bytes) () 10/19/2008 postreply 22:36:43

• 未来几星期房贷利率对本人很重要。一个short sale offer可能 -QinHwang- ♂ (15 bytes) () 10/19/2008 postreply 18:19:21

• Good luck. -cultuslake- ♂ (71 bytes) () 10/19/2008 postreply 21:12:01

• Thank you. ~6.25% for 30-year fixed will be OK -QinHwang- ♂ (0 bytes) () 10/19/2008 postreply 22:39:14

• TD is calling for a 50 basis point cut next week, which would br -彩盒子- ♀ (0 bytes) () 10/19/2008 postreply 19:56:25

• Thanks. The more cut, the better. :) -cultuslake- ♂ (0 bytes) () 10/19/2008 postreply 21:09:25

• I am happy too, with a variable rate mortgage. -AugustMom- ♀ (0 bytes) () 10/20/2008 postreply 07:24:27

• Good for you. :) -cultuslake- ♂ (0 bytes) () 10/20/2008 postreply 09:34:41