Bank of Canada Interest Rate Cut Expectations Tick Higher, Business News Network
This article appeared on the Business News Network on January 14th, 2016 and was written by Fergal Smith of Reuters.
Bank of Canada interest rate cut speculation intensified on Tuesday as crude oil prices and the Canadian dollar both weakened to 12-year lows, with traders pricing in a full 25-basis-point easing by mid year.
The Canadian central bank cut rates twice in 2015 as an oil price shock drove the economy into recession in the first half of the year, but has been sidelined since July.
“People are calling for the Bank of Canada to cut rates at the next meeting,” said David Bradley, director of foreign exchange trading at Scotiabank.
The implied probability of a Bank of Canada rate cut at next week’s interest rate announcement has climbed from 22 percent after a speech by Governor Stephen Poloz last week to more than 30 percent, while the market has nearly fully discounted a rate cut in May.
The prospect of easing helped drive the yield on the Canadian government’s two-year bond to a four-month low.
Even so, “the market is underpricing the probability of a rate cut next week,” said Andrew Kelvin, senior rates strategist at TD Securities.
A Jan. 7 speech by Poloz had left investors doubtful he would cut Canada’s benchmark rate this month.
However, the central bank’s quarterly Business Outlook Survey has since found that business sentiment has deteriorated, while investment and hiring intentions have fallen to their lowest levels since 2009.
“It’s clearly going to be a very close call for the Bank of Canada given the financial turmoil we have seen,” said Kelvin.
U.S. crude oil prices have fallen an additional 8 percent this week, dipping below US$30 a barrel. Moreover, Western Canada Select, a blend produced by Canadian oil companies, trades at a greater than $14 discount to U.S. crude oil prices.
“We know falling oil prices have preceded both the last two cuts from the Bank (of Canada),” said Kelvin.
The central bank assumed a $45 price for U.S. crude oil prices when making its latest forecasts for the economy in October.
Speaking on Tuesday, Canadian Finance Minister Bill Morneau acknowledged that the public is concerned about the economy, but declined to indicate whether the government will stick to its budget deficit pledge or boost spending.
“We will be working in our budget to make sure that our initiatives help to grow the economy. We think the initiatives we already outlined are the appropriate initiatives to make a difference,” he said.
The more mature area of Dufferin is located near Aberdeen Mall. Pacific Way, Cannel Drive, Hillside Drive and Place, Cascade Street, Mt. Dufferin Drive, Avenue and Crescent, Park Way, Plateau Place, Monteray Place, Davies Place, Sunshine Court and Place and Scott Place all make up this mature part of Dufferin. This area does have some newer homes but you do find more mature trees and landscaping in this region of Dufferin. One of the newer developments in Dufferin can be found at the top of Hillside Drive where it meets Copperhead Drive. Copperhead Drive and Saskatoon Place make up the newer development that is set against the hillside of Mount Dufferin. A lot of these homes in this area were built in 2010 onwards.
Hidden Trails at Mount Dufferin is the newest subdivision in the Dufferin area. It is located at the end of Pacific way and is bordered by Kenna Cartwright park. There are a few single family lots (4 phases) and two multi-family developments. Orabella townhouses are completed and located on Prairie Rose Drive. Rockcress Drive is the home to mostly single family however there is a strata development currently in the earlier stages of construction (2025).
