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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PrayingMantis's picture

 

 

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

 

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.

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."

Publicus's picture

Canadians have no future.

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.

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.

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.

Matt's picture

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

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).  ;-)

Oh regional Indian's picture

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

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..

y3maxx's picture

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

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

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!

oddjob's picture

This actually makes Vancouver housing prices cheaper for the Chinese.

MOB666's picture

Wait a minute that sounds alot like Straylia!!

Metalredneck's picture

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

Never One Roach's picture

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

Consuelo's picture

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

- Great Lord Humongous

 

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.

 

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/

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.

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.

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.

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.

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.

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!

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.

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'.

JustObserving's picture

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

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

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.

oudinot's picture

'gold for oil'

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

 

 

Eternal Complainer's picture

Actually, i think its Harper who's the bitch

Money Boo Boo's picture

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

Oh regional Indian's picture

Nice handle MBB, always makes me grin :-)

Money Boo Boo's picture

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

Oh regional Indian's picture

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

mkkby's picture

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

sudzee's picture

CDN $ flashcrash. 

GeezerGeek's picture

A perfect reason why gold got hammered.

Spungo's picture

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

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.