Canadian Personal Finance Blog

Archive for the ‘Bank Rates’ Category

Thursday caused the world to stop worrying about the Financial Apocalypse and start worrying about the demise of their Celebrity Aristocracy with the deaths of Ed McMahon, Farrah Fawcett and finally Michael Jackson.  I remember seeing Farrah Fawcett on the wall of most boys my age bedroom, and hearing her passing makes me feel a little older.

When celebrities die, does that change the economic climate? Hey anything is possible in this day and age, maybe we will see the Michael Jackson recovery?

The Poster

In the Financial Blogs This Week

With the summer coming is there an economic malaise about to fall? We shall see:

• The Canadian Capitalist points out that Borrowing Costs are Going up even though interest rates are staying the same.  Time to buy Bank Stocks again?
• Michael James points out Grocery Bag Lessons in Economic Incentives, and now he is a bring your own bag man.
• Preet at WhereDoesAllMyMoneyGo is pushing a Great Father’s Day Gift (OK I’d like to get it, but I am not entering as I feel there is a conflict of interest), if you want to go fast, go check this out.
• Four Pillars points out How to Use Aeroplan points, always useful to read case studies for services I use.
• Larry MacDonald wrote about how the Media’s Influence on the Stock Market, you’ve got to admit the media does swing things some times.
• Gail Vaz Oxlade asks How Do You Track Your Money, which is always a topic I love to talk about, although Gail’s method is a bit higher work than I’d do.
• The Canadian Tax Resource gives you 5 Tips to Pay Off Your Mortgage, which is always useful.

No LCBO Strike

The LCBO and their union decided not to turn off the liquor spigot, and thus the mad rush on Tuesday simply meant that the shelves on Wednesday needed a lot of restocking (and lots of profits for the LCBO as well). For those who rushed out, guess you can have a BIG party for Canada Day, or you can keep your stockpile, for another holiday? There is a tentative deal in place and now we can all look forward to a boozy summer (whoo hoo!).

Unfortunately for Toronto their strike continues on and their garbage continues to stack up. With the heat this week, might make for some very aromatic issues in Toronto.

U.S. Interest Rates Stay the Same

Interest rates in the U.S. will stay the same for now, said the Federal Reserve on Wednesday.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

Good to hear, but energy prices going back up is going to whiplash on food prices as well, so inflation being low may be wishful thinking on their part.

Stats Canada published their May 2009 numbers today and it is up but only 0.1% over the previous twelve months, which is good to see (for those of us who worry about inflation).  This means that prices are supposedly only up 1/10 of 1% over the previous twelve months (as close as you can get to ZERO (without being zero)).

The number is a little deceiving since the report does say:

The slowdown in the 12-month Consumer Price Index (CPI) was primarily the result of an 18.3% year-over-year price drop for energy products. Excluding energy, the CPI rose 2.3%.

Thus without the drop in gas and energy prices CPI is actually around 2.3% which sounds more realistic. With the spiking of gas and oil prices for the summer this could make for more interesting numbers in the coming months, unfortunately.

1/10 of 1% Inflation? Wow!

Gas Prices Down (for Now)

The following graph is even more interesting and shows just how volatile gas prices have been for the past little while:

Volatile to say the least!

The Big Price Picture

So how did all of this break down? Energy prices down a great deal, however, food prices are UP a large amount as well, so we have two volatile components in the index, whereas most other components are quite calm.

This does not bode well for those on fixed incomes having to deal with higher food prices (as well as those that are living near the poverty line).

As usual I am including the “big table” to show you the components of the CPI and where the biggest jumps are:

At least that is what the Bank of Canada Governor Mark Carney said on Wednesday:

In total, since December 2007, we have cut interest rates by 425 basis points to their historic lows and lowest possible levels. It is the Bank’s judgment that this cumulative easing, together with the conditional commitment to keep rates low for a considerable period, is the appropriate policy stance to move the economy back to full production capacity and to achieve the 2 per cent inflation target.

Given I suspect there wasn’t much else that could be done in terms of interest rates and such, this really is the default statement Mr. Carney can make.  So no more stimulation or interest cuts are likely from the Bank of Canada, not a big surprise, but nice to see they are going to try to keep these rates low for a while too.

What about our recovery from the Great Financial Apocalypse?

As a result of the current global economic and financial situation, the Bank now projects that the Canadian recession will be deeper than we projected in the January MPR Update. Our return to growth will be delayed by one quarter, to the end of 2009, and our recovery will be somewhat more gradual.

Whoops, so that recovery that was due mid-year is now kind of end of year-ish with a chance that it may only happen a little later than that. Again, not a real big surprise, given the entire Automobile industry has to get it’s “poop” together first and the associated economic upheaval caused by this (which we are in the middle of currently). 

Wow Mr. Carney, do you have anything positive for us?

• While there remains a high degree of uncertainty – particularly with the Canadian economy dependent on forces beyond our borders – we remain confident in the prospects of eventual economic recovery in Canada.
• This recovery should be supported by the following factors:

- the gradual rebound in external demand; 
- the end of the stock adjustments in Canadian and U.S. residential housing; 
- the strength of Canadian household, business, and bank balance sheets; 
- our relatively well-functioning financial system and the gradual improvement in financial conditions in Canada; 
- the past depreciation of the Canadian dollar; 
- stimulative fiscal policy measures;
- the timeliness and scale of the Bank’s monetary policy response.

OK! Well don’t give yourself whiplash patting yourself on the back just yet either. We need a weaker dollar, households to start spending, a stock market rally and an increase in demand? I am seeing signs of some of these things, but certainly not all of it yet!

Still useful to hear an expert’s point of view on our economic world, I guess.