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And Another Shocker: Bank Of Canada Stuns Market With Completely Unexpected Rate Cut

Tyler Durden's picture




 

Unexpected to most, The Bank of Canada cut its benchmark interest rate to 0.75% citing financial stability risks and worried about downside inflation risks. The press release is extremely negative...

 

Prophetically noted earlier...

As Bloomberg headlines reports...

  • *BANK OF CANADA CUTS BENCHMARK INTEREST RATE TO 0.75%
  • *OIL SHOCK BOOSTS DOWNSIDE CPI, FINANCIAL STABILITY RISKS: BOC
  • *BOC DELAYS FULL ECONOMIC RECOVERY TO AROUND END OF 2016
  • *BOC CUTS AVERAGE 2015 GROWTH OUTLOOK TO 2.1% FROM 2.4%
  • *BANK OF CANADA ASSUMES OIL PRICES AROUND $60 A BARREL
  • *WEAKER CANADA TERMS OF TRADE TO ADVERSELY AFFECT INCOMES: BOC
  • *BOC SEES ENERGY-EXPORT GROWTH FALLING TO 1%, FROM 6% IN 2014
  • *OIL DROP TO HAVE SIGNIFICANT EFFECT ON PUBLIC FINANCES: BOC
  • *BOC SEES ABOUT 30% CUT TO OIL AND GAS INVESTMENT IN 2015
  • *MAGNITUDE OF OIL SHOCK CREATES EXCEPTIONAL UNCERTAINTY: BOC

 

BoC Press release:

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.

Inflation has remained close to the 2 per cent target in recent quarters. Core inflation has been temporarily boosted by sector-specific factors and the pass-through effects of the lower Canadian dollar, which are offsetting disinflationary pressures from slack in the economy and competition in the retail sector. Total CPI inflation is starting to reflect the fall in oil prices.

Oil’s sharp decline in the past six months is expected to boost global economic growth, especially in the United States, while widening the divergences among economies. Persistent headwinds from deleveraging and lingering uncertainty will influence the extent to which some oil-importing countries benefit from lower prices. The Bank’s base-case projection assumes oil prices around US$60 per barrel. Prices are currently lower but our belief is that prices over the medium term are likely to be higher.

The oil price shock is occurring against a backdrop of solid and more broadly-based growth in Canada in recent quarters. Outside the energy sector, we are beginning to see the anticipated sequence of increased foreign demand, stronger exports, improved business confidence and investment, and employment growth. However, there is considerable uncertainty about the speed with which this sequence will evolve and how it will be affected by the drop in oil prices. Business investment in the energy-producing sector will decline. Canada’s weaker terms of trade will have an adverse impact on incomes and wealth, reducing domestic demand growth.

Although there is considerable uncertainty around the outlook, the Bank is projecting real GDP growth will slow to about 1 1/2 per cent and the output gap to widen in the first half of 2015. The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response. The Bank expects Canada’s economy to gradually strengthen in the second half of this year, with real GDP growth averaging 2.1 per cent in 2015 and 2.4 per cent in 2016. The economy is expected to return to full capacity around the end of 2016, a little later than was expected in October.

Weaker oil prices will pull down the inflation profile. Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year. Underlying inflation will ease in the near term but then return gradually to 2 per cent over the projection horizon.

The oil price shock increases both downside risks to the inflation profile and financial stability risks. The Bank’s policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projection horizon.

*  *  *

The reaction in CAD is extreme...

 

to its weakest since April 2009

 

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Wed, 01/21/2015 - 11:09 | 5687936 PrayingMantis
PrayingMantis's picture

 

 

... now you know why the currency is nicknamed "Loonie" .. eh ...

 

Wed, 01/21/2015 - 11:13 | 5687952 SumTing Wong
SumTing Wong's picture

The CBs are just fucking with us. ECB disappoints, so BOC to the rescue.

Fuck 'em all. I'm long tangible items.

Wed, 01/21/2015 - 11:18 | 5687986 SWRichmond
SWRichmond's picture

"Likewise be all manner of beasts, when they be brought into the field and cried havoke, then every man to take his part."

Wed, 01/21/2015 - 12:07 | 5688223 Publicus
Publicus's picture

Canadians have no future.

Wed, 01/21/2015 - 12:12 | 5688245 Spitzer
Spitzer's picture

No we don't.

 

Its pathetic how the US Feds have more control over Canada then they do against some of the states.

Wed, 01/21/2015 - 12:31 | 5688297 Bay of Pigs
Bay of Pigs's picture

At least you understand gold. Count yourself lucky. Gold nearing $1600 in Loonies...a clear breakout. Silver too (22+).

Most Canadians are ignoring the flashing red lights on oil and RE and the overleveraged pig banks like TD, RBC and CIBC.

Wed, 01/21/2015 - 12:43 | 5688379 nope-1004
nope-1004's picture

+100

Wed, 01/21/2015 - 14:06 | 5688653 mkkby
mkkby's picture

While we're at it... why does Canada have that ugly decaying bitch pictured on their currency and even gold coins?  It's as it they relish the idea of being slaves to someone who happened to be born to a certain family.

Wed, 01/21/2015 - 14:54 | 5688910 Matt
Matt's picture

As opposed to old dead white men who are also descended from a particular family?

Wed, 01/21/2015 - 12:25 | 5688301 Save_America1st
Save_America1st's picture

get out of the banking system.  reduce all counter-party risk by getting the fuck out.  Hold cash, stack phyzz, become your own "central banker", and get your shit in order now so you can sit back and watch the fireworks as this whole thing explodes in the very near future.

Don't forget to stock up on popcorn. (the non-GMO kind if you can find it).  ;-)

Wed, 01/21/2015 - 12:16 | 5688256 Intellikon
Intellikon's picture

There will be no interest rate hike. Ever.

https://twitter.com/Intellikon/status/554808154194972673

Wed, 01/21/2015 - 11:19 | 5687987 Oh regional Indian
Oh regional Indian's picture

Inflation is only good for flaccid pricks and banksters...

Wed, 01/21/2015 - 11:31 | 5688047 cnmcdee
cnmcdee's picture

SNB surprises markets with a basis rate change and blows apart half a dozen brokerages and many hedge fund markets.

BOC surprises markets with a basis rate change and people get timbits with their coffee at Tim Hortons..

Wed, 01/21/2015 - 11:33 | 5688058 y3maxx
y3maxx's picture

Imported food prices just rose 3%....yikes

Wed, 01/21/2015 - 13:29 | 5688530 Bay of Pigs
Bay of Pigs's picture

The SNB move will have serious ramifications for weeks, months and even years. 

https://www.youtube.com/watch?v=BnRX4LOORkQ

Wed, 01/21/2015 - 11:17 | 5687982 JRobby
JRobby's picture

Meanwhile, in Canada, touted throughout this crisis as some of the most well capitalized and stable banks in the world because they did not participate in the Real Estate bubble frenzy........................

CONTAGION!

Wed, 01/21/2015 - 12:48 | 5688391 oddjob
oddjob's picture

This actually makes Vancouver housing prices cheaper for the Chinese.

Wed, 01/21/2015 - 16:32 | 5689464 MOB666
MOB666's picture

Wait a minute that sounds alot like Straylia!!

Wed, 01/21/2015 - 11:11 | 5687941 Metalredneck
Metalredneck's picture

Three years left on the mortgage, then they can do what they like.

Wed, 01/21/2015 - 11:18 | 5687989 Rainman
Rainman's picture

' Biggest Housing Bubble in the World is in ... Canada '

           http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/13/the-biggest-housing-bubble-in-the-world-is-in-canada/

Wed, 01/21/2015 - 11:38 | 5688086 Never One Roach
Never One Roach's picture

How do you say, "Just walk away" in Canadian?

Wed, 01/21/2015 - 11:42 | 5688109 Consuelo
Consuelo's picture

"Just walk away, and there can be an end to the horror..."

- Great Lord Humongous

 

Wed, 01/21/2015 - 11:44 | 5688119 Arnold
Arnold's picture

I've always wanted to live in a foreign country.

Something on a lake shore, not too much winter.........oh,........... never mind.

 

Wed, 01/21/2015 - 11:51 | 5688159 HowdyDoody
HowdyDoody's picture

Putin is offering free land for anyone wanting to start a farm or other business.

http://rt.com/politics/224099-russia-land-free-east/

Wed, 01/21/2015 - 13:32 | 5688542 Renfield
Renfield's picture

Brilliant.

When (IF) the any leaders rise again in the "west", and they do something to reverse the depression in their countries, it will look a lot like this.

Until then, "voters" will continue to enjoy the rotten criminal fruit of their elections, as they watch their countries be consumed by human pigs.

Wed, 01/21/2015 - 13:02 | 5688440 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

The translation is.... _Who farted_?, but we have two official languages

and I don't know the French language translation.

Wed, 01/21/2015 - 13:43 | 5688569 Renfield
Renfield's picture

Two official language significantly reduces the chances of ordinary Canadians to run their own country.

Just think - someone may be a brilliant administrator, or general, or have run some businesses - yet they have no chance to be elected to high political office, simply because they are not fluent in an archaic french dialect that no-one in the world speaks except for in that small insignificant patch named Quebec. And a vanishingly small percentage of the population is - or ever will be - fluently bilingual.

Of course, the policy is also great for increased governmental regulatory presence. Just think, now we can hire inspectors to check labels in two languages! AND, of course, since all our regulatory bureaucrats are "bilingual", their pay is high enough to reflect such expertise. And if the french labelling requirement discourages competition by adding onerous marketing costs, that's good for government-approved monopolies too! Win-win in a bureaucrat's eyes.

If Canada's leadership were serious about encouraging productivity in Canada, they'd scrap the moronic bilingual policy.

Wed, 01/21/2015 - 15:11 | 5689021 Charming Anarchist
Charming Anarchist's picture

Impossible to scrap biligualism in Canada because people speak both languages whether you like it or not --- they always have, through thick and thin. 

 

Regardless, you should look under the hood.  The history of French Canadian culture involves many people with huge extended families.  People often have dozens of uncles and aunts.  They have natural networks that the rest of Canada lacks.  It is harder to pull the NWO crap wool under their eyes.  False flags and war games are much more difficult to hide from them.  The French language is defacto protection against propaganda.

Wed, 01/21/2015 - 13:57 | 5688616 JuliaS
JuliaS's picture

Correct me if I'm wrong, but I believe in Canada you can't walk away from a mortgage. You also have many weird signing laws, where, say, when hunting for a house, you hire a buyer's agent, and he's entitled for compensation if a house is bought withing a period of time (with or without services). It's in fine print, so sure, many hire and then say: "Screw fees! I can do a better job." They buy a house and then get a fee in the mail from the agent who didn't do squat.

In the US laws are jurisdiction based. In Canada the same law applies to everyone and housing, as far as I can tell, is ran by mafia. CMHC - the mortgage insurer is something like our Freddie and Fannie.

Practically, Canada has everything we do and then some. 5 big banks that are essentially 1, and the board of directors are just an extension of our Fed and full of ex-GS men.

Canada is just as messed up, but unlike the US is stuck in early 2008 in terms of housing. Looks like this year it'll finally be able to turn the page.

Wed, 01/21/2015 - 14:08 | 5688667 disabledvet
disabledvet's picture

Tickets for the Mars Express are selling like hotcakes.

 

DONT BE LEFT OUT!

DIE ON ANOTHER PLANET WHIKE THERE IS STILL TIME!

Wed, 01/21/2015 - 17:12 | 5689654 Abbie Normal
Abbie Normal's picture

There is no "walking away" on Canadian mortgages.

And if you're in the middle of a 5-year term and want to refinance at a lower rate, you have to pay off the unearned interest remaining first.

But those are the cards that Canadian homeowners are dealt if they want to play.

Wed, 01/21/2015 - 13:20 | 5688487 HardAssets
HardAssets's picture

Metal redneck: "Three years left on the mortgage, then they can do what they like."

You really think they care if you have paid off your mortgage ? Quite a few folks have found out differently.

They can foreclose on anything they want. They just bankrupt you using the 'legal process' while you try to fight their army of whore lawyers. Or they bribe politicians to declare their theft 'legal'.

Wed, 01/21/2015 - 11:12 | 5687942 JustObserving
JustObserving's picture

Everything is under control as Central Banksters take desperate measures at an increasingly frenetic pace

Wed, 01/21/2015 - 11:30 | 5688045 Arnold
Arnold's picture

Watch the ice, eh?

Wed, 01/21/2015 - 11:32 | 5688057 cnmcdee
cnmcdee's picture

This won't even make an intermission commercial on Hockey Night in Canada however if a major player gets a knee injury in the third period causing some team to miss playoffs .. Look out! Now we're talking about a major issue

Wed, 01/21/2015 - 11:12 | 5687943 nuubee
nuubee's picture

We need an economic-fringe country with lots of resources and a history of thumbing their nose to their powerful neighbor to start the ball rolling down to some kind of PM-based currency.... Oh, Canada..

Hah, Can you imagine the histrionics from Washington if Canada decided they would only price their oil in gold? It would be like Streisands girlfriend deciding she liked men instead.

Wed, 01/21/2015 - 11:16 | 5687972 oudinot
oudinot's picture

'gold for oil'

Not a chance; under the honourable Harper , Canada is the US's bitch!!

 

 

Wed, 01/21/2015 - 11:30 | 5688040 Eternal Complainer
Eternal Complainer's picture

Actually, i think its Harper who's the bitch

Wed, 01/21/2015 - 11:35 | 5688067 Money Boo Boo
Money Boo Boo's picture

Harper has been telling K Street Lobby for years that he's 'For Sale'

Wed, 01/21/2015 - 11:37 | 5688090 Oh regional Indian
Oh regional Indian's picture

Nice handle MBB, always makes me grin :-)

Wed, 01/21/2015 - 13:13 | 5688480 Money Boo Boo
Money Boo Boo's picture

Thanks Oh! been reading your stuff for four years, keep it comin!

Wed, 01/21/2015 - 14:10 | 5688680 Oh regional Indian
Oh regional Indian's picture

Goof to know MBB, I intend to turn it up a notch even!

Wed, 01/21/2015 - 14:11 | 5688683 mkkby
mkkby's picture

Why not nominate Sid Crosby for PM.  Get rid of Harper and the banksters.

Wed, 01/21/2015 - 11:11 | 5687951 sudzee
sudzee's picture

CDN $ flashcrash. 

Wed, 01/21/2015 - 11:34 | 5688060 GeezerGeek
GeezerGeek's picture

A perfect reason why gold got hammered.

Wed, 01/21/2015 - 11:12 | 5687955 RadioactiveRant
RadioactiveRant's picture

RBA tomorrow?

Wed, 01/21/2015 - 11:18 | 5687988 Lady Jessica
Lady Jessica's picture

Correct.

Wed, 01/21/2015 - 11:14 | 5687960 Spungo
Spungo's picture

At least they didn't set negative interest rates..... yet

Wed, 01/21/2015 - 11:35 | 5688070 plane jain
plane jain's picture

Mr. Stapleton, honors economics, junior year of high school:

What if you really wanted to increase the rate of spending? You could actually have a currency that was worth less everyday...a negative interest rate.

 

NIRP, when regular inflation isn't enough.

Wed, 01/21/2015 - 11:40 | 5688106 Oh regional Indian
Oh regional Indian's picture

Natural inflation/deflation cycles would happen in a demand-side driven world.

In this supply side mania, there is no natural cycle left because everything can be pumped/manipulated.

Financialization is the disease and the current oil swingathon is just it's latest overt showcase.

Wed, 01/21/2015 - 11:25 | 5687983 Ness.
Ness.'s picture

The pricks in charge (ECB/BOC) empty both fucking barrels and all they get is measly +1.5 in the Spoos?  Ha.  That's laughable, man!

At least K-Hen is selling his paper gold - cause, ya know, that makes ALOT of sense (not).  I love the smell of desperation in the morning.

<edit>  K-Hen apparently just found the 'buy-all/sell gold' button.  Whew!

Wed, 01/21/2015 - 11:46 | 5688124 gmak
gmak's picture

Puh-leeze. S&P is up 4 points. So there!

Wed, 01/21/2015 - 11:24 | 5688014 nakki
nakki's picture

I was just thinking that Canada with their "sound" banking system couldn't be to far behind. Next up England and just to round it out the good old boys at the "FED", because everyone's doing it.

Wed, 01/21/2015 - 11:36 | 5688077 cnmcdee
cnmcdee's picture

When Yellen goes on an episode of between two ferns and starts singing (or trying to pick up Zach) we'll know it's time.

Wed, 01/21/2015 - 11:26 | 5688024 Son of Captain Nemo
Son of Captain Nemo's picture

In honor of our great white north cousins... 

What's a shit rope?

"Are we sliding down some kind of shitty rope"?!!! Bubbles

Wed, 01/21/2015 - 11:38 | 5688095 cnmcdee
cnmcdee's picture

1% of Nova Scotia's GDP probably is derived from that show most of it under the table btw..

Wed, 01/21/2015 - 11:48 | 5688135 Son of Captain Nemo
Son of Captain Nemo's picture

1% of Nova Scotia's GDP probably is derived from that show most of it under the table btw..

And I got news for you cnm

I'd replace the David McKay(s) and the Brian Porter(s) RBC and Scotia any day of the week with the cast of that show to do a better job then the clowns currently running it!

Wed, 01/21/2015 - 11:28 | 5688026 Jethro
Jethro's picture

A $0.03 change?  Meh. 

Until something bigger than the SNB move happens, this is window dressing.  The first currency to the bottom wins.

Wed, 01/21/2015 - 15:04 | 5688966 Matt
Matt's picture

Just wait for the mortgage crisis, CHMC getting tapped out, then deposit haircuts to make the banks whole. Cyprus'd!

Wed, 01/21/2015 - 11:59 | 5688049 frankly scarlet
frankly scarlet's picture

cause the CDN loonie/economy and govt revenues are all tied to the price of oil....so Mulcair was right the CDN govt has put all it's eggs in the oil basket, and well, all that is in the tiolet for now and into the foreseeable.

Wed, 01/21/2015 - 12:27 | 5688251 FranSix
FranSix's picture

BOC treasury bill rates are above the policy rate for now:

http://www.bankofcanada.ca/rates/interest-rates/t-bill-yields/?page_moved=1

Which means that there is an infarcus in the financial sector. CIBC was notably exposed to asset-backed commercial paper, known to be exposed to the oil sector, and is probably exposed to housing sector and related debt.

Wed, 01/21/2015 - 12:14 | 5688252 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Harper, Poloz, Oliver, and all the Conservative neocons are now toast.

 

p.s. ex-US-Army chemical weapons specialist arrested in Ottawa

this morning at the Chimo Hotel with 'pipe bombs' containing

OSO4. Chimo Hotel evacuated of all guests at 4:00am and suspect arrested soon after.

MASTER OF UNIVERSE reporting 'live' from the town that FUN forgot.

:|

Wed, 01/21/2015 - 12:39 | 5688356 earnulf
earnulf's picture

Guess I still fail to understand how a bank can pay negative interest rates on deposits, but charge 21-29% on Charge accounts.

 

Dang, I sure wish I could count on 20-30% profit margins!

Wed, 01/21/2015 - 12:43 | 5688374 Pareto
Pareto's picture

..........Because nothing says prosperity like boot fucking your own currency.  Thanks Poloz for increasing my cost of inputs making me less competitive internationally while eviscerating my purchasing power both abroad and at home.  Eat a bag of dicks.

Wed, 01/21/2015 - 13:39 | 5688562 Bay of Pigs
Bay of Pigs's picture

The BoC has been jawboning for 6 or 7 years about raising rates.

A bunch of liars and fucktards...

Wed, 01/21/2015 - 15:06 | 5688979 Matt
Matt's picture

In this case, it is easy to allow that they did not anticipate a collapse in oil prices. They probably piled into the "higher oil prices forever" side.

Wed, 01/21/2015 - 17:50 | 5689823 MeelionDollerBogus
MeelionDollerBogus's picture

dinja know - oil, stawks and real estate have reached a new permanent plateau!

Wed, 01/21/2015 - 12:53 | 5688420 Bunga Bunga
Bunga Bunga's picture

PRINT!

Wed, 01/21/2015 - 13:00 | 5688423 noben
noben's picture

MFer! Should've converted my Loonies into Greenbacks when they were still worth something.

OTOH, if you got CNY or USD, you can buy half the country for pocket change.

"True North, strong and free"? Good one. LMAO.

p.s. Canadians, just keep "being nice". Keep telling yourself that "It'll all work out." It'll be over soon. LOL.

Wed, 01/21/2015 - 17:17 | 5689688 MeelionDollerBogus
MeelionDollerBogus's picture

well... for those who used Canadian dollars to buy stock / etf in USD ... you get an automatic additional 5% to 10% from recent purchases (a lot more if still holding on) fight-back vs the drop that hit various stocks / s&p recently. Although... being pushed back up anyhow as of late, there's not much loss to fight in those cases either.

Wed, 01/21/2015 - 19:11 | 5690123 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Canadian here.

Poloz is in over his head even more than most central bankers. President Harper let Mark Carney go to London because he was petrified Bay Street might appoint Carney leader of the Liberal Party and fling Steve's ass out of the PMO. Harper knew Poloz was a moron, which meant he wouldn't be a threat to Harper politically. 

Wed, 01/21/2015 - 19:44 | 5690252 Herdee
Herdee's picture

And Canada's Prime Minister Stephen Harper couldn't give a fiddler's damn about beheadings in Saudi Arabia.here's the latest arms sales deal to another American puppet.

http://www.msn.com/en-ca/news/canada/canada%E2%80%99s-arms-deal-with-sau...

Wed, 01/21/2015 - 20:54 | 5690531 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

 

http://www.bis.org/publ/work403.pdf

Benign Neglect of the Long Term Interest Rate by Philip Turner 2013

 

NOTE: A good academic paper on LTIRs that explains much, Z/H.

Thu, 01/22/2015 - 00:01 | 5691144 hedgiex
hedgiex's picture

Why a Shock ? In the midst of a currency war with each to its own. the increase/reduction is only asinine to People with losing positions. CBs just follow up with justifications of their actions on what is the hottest topic in town (in this case Oil). Still fail to see easy to understand "sell" on policies ?

You should not give a damn if you hold long term physical assets and/or moving towards zero debts.

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