Bank of Canada Hold Interest Rate at 1.75% Says Trade Conflicts Biggest Risk

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    Helmholtz Watson

    The Bank of Canada held its key lending…


    Helmholtz Watson

    The Deputy Gov. of the Bank of Canada Timothy Lane says:

    global economic uncertainty likely to persist even if US and China reach a trade deal
    global uncertainty is likely to have a lasting effect: questions remain about whether market pricing fully reflects risks
    tone of developments in recent weeks gives bank more confidence in its October outlook for growth and inflation
    notable economic strengths and on target inflation mean Canada is resilient but it is not immune
    damaging effects of trade conflict are only partially offset by easier monetary policy
    recent data augur well for households financial situation and future spending, although consumer confidence has been softening
    heavy household borrowing creates vulnerabilities that could amplify any negative shock to the economy; lowering rates further could make vulnerabilities worse
    Canadian employment wage growth data suggest labor market is continuing to tighten
    support from higher spending by provincial governments expected to Wayne in 2020 as consolidation in Ontario and Alberta takes hold in recent straight then BC and Québec normalizes
    there is no reason for the Bank of Canada to move in step with the US Federal Reserve when it comes to rate moves
    diversion’s between monetary policies of Bank of Canada and US Fed is not as stark as sometimes pretrade
    in hindsight moves in Canada and US toward balance budgets starting in 2010 were premature

    Helmholtz Watson

    Bank of Canada’s Timothy Lane Speech:

    If had inflation persistently below target we would cut rates
    Governing Council did not consider merits of insurance cut ahead of December 4 announcement
    Cutting rates now in case something might happen in the future could set us up for a bigger shock
    Wouldn’t say we are being upbeat in our assessment of Canadian economy, we see risks as being more balanced than in the past
    Stronger investment is generally an encouraging sign
    If trade conflicts worsen, could trigger world recession
    Our sense is there is bit of a disconnect between optimism in markets and potential risks tied to trade disruption
    For some time now we’ve seen markets taking a very optimistic tack, reflected in a near record equity markets
    We are monitoring appreciation of Canadian dollar, it’s an important input; lately it has been in a pretty stable range

    Helmholtz Watson

    Bank of Canada’s Timothy Lane Speech:


    alternative lending may create risks in Canada mortgages
    alternative lending is a huge part of mortgage situation
    Canada financial system is still very resilient
    composition of debt has shifted to less risky borrowing
    Canadian banks are well-capitalized and resilient
    housing risk are something the back of Canada is keep an eye on
    climate change is potential major factor for Canadian economy

    Helmholtz Watson

    BoC Chair Poloz:

    We don’t put a lot of weight on individual data points, especially jobs
    Trend has been a positive one for the labor market
    Churn in labor market points to better job matches and productivity

    Asked about insurance rate cut if jobs fell again, said would not look at just employment, would look at other indicators because employment tends to lag
    We’re seeing a bottoming out in global economy in most indicators
    We’re expecting statisticians to eventually uncover more productivity
    When rates are low monetary policy is at its most feeble and fiscal policy is at its most powerful
    We expected investment to pick up this year, we started off the year strong then we faltered again
    Inflation on target today suggests that the BOC has done its job

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