Canada Disappoints, Keeps Rates Unchanged As Oil Patch Burns

Tyler Durden's picture

On Tuesday in “Canada Set To Unleash Negative Rates As Oil Patch Dies, Depression Deepens,” we outlined the dilemma facing Stephen Poloz and the BOC.

If the central bank cuts rates and drives the loonie lower, Poloz may be able to keep the CAD price of WCS above the marginal cost of production and thus avoid shut-ins that would cost the Canadian economy still more oil patch jobs.

However, further loonie weakness risks triggering a backlash from Canada’s beleaguered consumers who may scale back spending if their purchasing power is further eroded (i.e. if cucumbers continue their relentless push towards $10).

In short, the BOC is damned if they do and damned if they don’t, and going into Wednesday, the rate decision was a coin toss.

Well, Poloz has spoken and the Bank of Canada has decided to save its dry poweder for another day. The benchmark rate remains on hold at 0.50% even as the central bank cuts its GDP forecast.


And there goes whatever was left of the oil patch, up in a 150 pip plume of smoke...

To be sure, this is just delaying the inevitable and here's the chart that explains why: 

A rising CAD effectively drives the country's producers out of business. The longer Poloz waits, the larger the next cut will ultimately have to be, which means that if the BOC waits too long, Poloz may have to rethink his contention that the effective lower bound is -0.50%.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Lady Jessica's picture

Someone finally talked some sense into Poloz.  Who could it be?

The Real Tony's picture

I'd like to believe it was me. I gave him proper shit on youtube and on the online version of the Canadian newspapers.

Pareto's picture

Thank you man!  I was seriously pissed thinking he was going to cut them.

Manthong's picture

WTF.. Those hosers are not dancing to Janet’s tune….

mtl4's picture

Poloz was stuck on this one, normally we'd love to follow Old Yeller but our commodity economy is taking a shit-kicking so rates should drop except that will kill retail.......I think it's called being between a rock and a hard place.

Abapom's picture

thanks man

if he would drop another .25 it would be brutal.


Canadian Dirtlump's picture

So let's get this straight zerohedge... not lowering the benchmark rate ( which should theoretically weaken the currency ) caused a massive move in the USD/CAD rate in the direction a rate move theoretically would have caused.

It's almost like EVERY market is bullshit, and every mainstream and non mainstream pundit trying to "call" the moves is like pissing into the wind.

SimplePrinciple's picture

You're reading it backwards.  One USD buys fewer CAD, which means the CAD strengthened today.  Gotta agree with the rest, though.

Niall Of The Nine Hostages's picture

I want to believe that Poloz's admin staff started trying to book their 2016 vacations, took one look at what it would cost to go to Cuba this year, and had a word with their boss ahead of the decision.

At least one woman of my wife's acquaintance has had to cancel her vacation outside Canada for this year. With the loonie under 70 cents she simply can't afford it.


FrankDrakman's picture

Last November, my GF was all over me about a ski vacation. "Let's go to Utah!" she said. 

"Let's stay in Canada" sez I. Back and forth and back and forth "Utah's so nice, I've been to Whistler, I've been to Banff,etc", but I was firm.

We're going to Big White next week. $2.5k Cdn for a week of 2-bedroom condo, lift tickets for 3, and rental car. Same thing in Park City: over $4k Cdn. 

back to basics's picture

The price of a head of cauliflower for Canadian consumers was his clue that if he drops the $CDN any further things might get ugly for Canadian politicians real quick.

Arktik's picture

4.26 for organic cauliflower this morning at Atwater market (a phony farmers market where everything is more expensive)

rogerrabbithole's picture

He has to wait to go full nirptard. Oil hasn't hit $10.00 a barrel yet.

Abapom's picture

folks Canada is joke.

lots of natural resources but very hard to maintain organized society i climate its resides.


it is not impossible i mean look at Russia across on the other side. but Russia success is hard labor and tough people.

Canada is run by few and by public sector unions . no matter what they always vote for liberals who are insane birocrats and unions hooker.


Financial world understand that 46c of every dollar from tax, goes directly to public sector unions PAYCHEK

that is why country underdeveloped and people are getting killed by walking on crowded sidewalks in downtown Toronto. Or Go train walkway.


Canadian Dirtlump's picture

"very hard to maintain organized society i climate its resides."


Very hard to make lucid points when you mix scotch and quaaludes too.

Abapom's picture

by that i meant :

where are highways railroads ?

4 hour drive north of toronto is like being almost on another planet.

Manitoba? Saskatcewan? Roads highways accomodation? Population?

lets not go to east coast where it is 1 person per 1000 sq miles....

These areas deserve massive investment in infrastructure so that it can be inhabitable.

mean while downtown toronto vancouver are so crowded that Hong Kong looks like subrb.


MadVladtheconquerer's picture
MadVladtheconquerer (not verified) Abapom Jan 20, 2016 10:53 AM

A compromise:  If Canada will cede BC to the US, then we'll allow Canada to use our rail lines. 

PeakOil's picture

BC join the US?? Fuck that noise....Cascadia bitches!!

FrankDrakman's picture

"lets not go to east coast where it is 1 person per 1000 sq miles...."

Pop of 4 maritime provinces, 2011: 2.3 million

Area: 195,000 sq miles

Pop density: ~11 per sq mile. Your figure: .001 per sq mile

So you were only off by a factor of about 11,000. 

and apparently, you've never been 4 hours sw of Dalla. 

unrulian's picture

Umm no scotch here...I think it's bath salts and great white

Killdo's picture

both Toronto and Vancouver are very provincial and built in a chaotic way that architecturaly makes little sense. Canada is like a vilage in Eastern Europe in many ways

Arktik's picture

It is clear that you have not visited Hong Kong. 

hal10000's picture

Keep Toronto in Toronto, thanks.  You make it sound like a bad thing that four hours from Toronto doesn't look like Toronto.

With the economy tanking like it is, Toronto won't be "the place to be" at all.

TheDanimal's picture

Can you order ludes on the internet or something, I tought they were out of production officially but I bet someone's still making them?  With the way all the older folks keep going on about them they sound like they're A) the shit, and B) extremely profitable.

mtl4's picture

Don't worry, just stay put and we'll handle the wouldn't make it through a winter out east anyway.

DeadFred's picture

Who needs the oil patch anyway. Isn't it about time for them to break the markets though? It's getting pretty dicey today.

cheech_wizard's picture

They obviously need more cabbage patches (given their recent spike in food prices)...

Minister of Bread and Circuses's picture

The tar sands were not going to be saved by a basis point or two.

Abapom's picture

spain built 110 km of subway for 12 Bil USD

in Toronto 4 km Shepard line ( four Kilometers ~ 3 Miles) cost 3.8 USD ( at FX rate at that time 4 years ago)


god help canadinas.


BeaverFever's picture

True, but the trains in Spain run mainly on the plains...

The Real Tony's picture

The Bank of Canada and Poloz must have actually read all my replies on the online version of the Globe and Mail newspaper. I gave them reasons no one had even thought about yet. They seemed to get my point about trying to fund Canadian debt with a falling dollar which would have resulted in much higher interest rates as a risk premium in the future.

Abapom's picture


that is the only way i guess...

haha but debth level is insane...biggest among G8 ! in trilions Dolars

but in canada you will never see crash like in US.

you see in canada most of productive people and talent have Backup country to go.

very hard to keep them .

also at the moment abd thing is that massive amount of NON-Unionised people are being fired to

sustain unions...THAT is bad thing.

balance will shift and that is not good.


Canadian Dirtlump's picture

Can you give us the number to your dealer? I'm getting a buzz READING your replies.

squid's picture

"you see in canada most of productive people and talent have Backup country to go.

very hard to keep them ."


I left 25 years ago.....the spread sheet looked shitty then and its worse now.


Max tax rate in Singapore is 17%.


In Singapore you don't make doctor's appoinments, you just walk in, pay your S$20.00 and see the GP, pediatrician, etc.... Canada has a 6 week wait to see a pediatrician and you must be refered by a GP.


Enjoy the fun and the Literature Teacher....hosers.



Abapom's picture

i did not leave... when i could. i regret every day.

now health care changed... third of population does not have family doctor. GP..

now if you sick you go to walk in clinic, or emergency. but emergency if your life is not

in danger you may wait minimum 5-6 hours in GTA area...

you pay nothing except for drug and crotches if you need them...


Now if you are teacher in union - 80K salary - 60K pension! (repeat:$60 000 year Pension !!! )

where else on planet is that possible? then canada is good.



asteroids's picture

The spike in the Loonie is temporary. Wait a few days, it'll be back down to the same level.

Abapom's picture

it cannot go below 65 c USD for more that one trading session.

trade agreements.

BOC will pump it up. it must.

i think.

Joe Trader's picture

Wait a few days? Try 1 hour.....USD/CAD back to 1.464 from a mini-flash crash low of 1.4492 - it gapped down more then a cent on the news.

I converted most of my CAD in 2013, and the rest in July 2014...what a relief that I was on the right side of the trade..

Global Hunter's picture

It was just in the CBC this morning that 4 cities have asked for a break on having refugees sent to them because they can't keep up.  so obviously the economy is doing great if we can take in tens of thousands of refugees why would the BoC need to cut?

Main_Sequence's picture
Main_Sequence (not verified) Global Hunter Jan 20, 2016 10:48 AM

Can't wait for the other 25,000 refugees before the end of 2016...

juggalo1's picture

When complaining about produce prices in Canada be sure to show location.  If you are in Alberta, the comparable location would be Alaska, where fresh produce also is expensive compared to lower 48 prices.

Canadian Dirtlump's picture

Is this a serious post or not? I would have assumed prices in Alaska were way higher than they are at say, No Frills in Lethbridge, Alberta, Canada.


That "currency collapse tard" thread which showed canadian prices from the arctic still have me laughing. The idea that some people were duped into thinking that is what the "average canadian" pays is a twin turbo joke.

Toonces McGraw's picture

Laughable indeed. There are just as many ignorant fools as there are wise men on this site. Still the most informative site around though.

BurningFuld's picture

Great Value Bacon at Walmart just over the line from here in the US $3.94USD.  Bacon at at my local small grocery store here in Canada $3.50CND. Suck it boys.

Haole's picture

Save it's dry powder?  I guess there needs to be some humor interjectected to break-up the manotany of monetary water torture...

Jason T's picture

that'll separate the men from the boys up there for sure. 

CoMooter's picture

I must have missed something...I thought that Justin the wonder-dolt was going to fix everything that the Tories have 'screwed up' just a few weeks ago...careful for what the Canadian FSA has wished for - and gotten.

The train wreck that is Canada's social system since the dolt's fathers' time has an appointment with destiny, and most of the populous is completely unprepared for what is coming.

Enjoy the ride down - as well as the cold.