Loose Money Continues in Canada (Sept 2011)

Yes the Bank of Canada yesterday confirmed no rate increases in their key overnight rate., keeping it at 1% for September 2011.

No big whoop, right? It’s been like this for a few years now, but, read the following from the bank:

The global economic outlook has deteriorated in recent weeks as several downside risks to the projection in the Bank’s July Monetary Policy Report (MPR) have been realized. The European sovereign debt crisis has intensified, a broad range of data has signalled slower global growth, and financial market volatility has increased sharply. Recent benchmark revisions show that the U.S. recession was deeper and its recovery has been shallower than previously reported. In combination with recent economic data, this implies that U.S. growth will be weaker than previously anticipated. The Bank expects that American household spending will be even more subdued in the face of high personal debt burdens, large declines in wealth and tough labour market conditions. Fiscal stimulus in the United States will also soon turn into material fiscal drag. Acute fiscal and financial strains in Europe have triggered a generalized retrenchment from risk-taking and could prompt more severe dislocations in global financial markets. Resolution of these strains will require additional significant initiatives by European authorities. Growth in emerging-market economies has been robust, although its rate and composition will be affected by weakness in major advanced economies. While commodity prices have declined owing to diminished global growth prospects, they remain relatively high.

Ur, um, this does not sound like a financial recovery, if anything it sounds like a financial relapse more than anything else. On the basis of this, the bank is of course leaving rates alone, and also they think inflation is at 2.0% right now (I disagree as does Stats Canada, but who are we to quibble).

The really weird thing about this, is now we have pundits that are predicting possible rate cuts?!? Holy crap on a cracker Batman, cuts? Yup, given how bad the U.S. economy is going Canada may have to lower it’s rates to keep from having a $1.50 Canadian Dollar, wow (I exaggerate but a Canadian dollar above parity with it’s U.S. counterpart is a very bad thing for the Canadian Economy as a whole).

Enjoy your loose money for a while longer, seems like we won’t be getting any rate increases for a while? Don’t know that for sure (and don’t quote me either), but that seems to be what is implied!

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