Canadian Personal Finance Blog

Forgot that CPI numbers came out today, so we get a special update, and some very good news as well with the CPI dropping by almost a full point to 2.6%, mostly on the strength of the plummeting price of gasoline.

Although the growth in gasoline prices eased in the 12 months to October, they were still the most significant upward contributor to the overall growth in the Consumer Price Index (CPI). Prices at the pump increased 13.3%, compared with a 12-month change of 26.5% in September. On a monthly basis, gasoline prices fell 13.4% from September to October 2008.

Even with gas prices dropping it still was the largest price increase, which means next month’s numbers should be even more interesting, because gas prices in Ottawa right now are 70 cents a liter.

With inflation levels dropping will this mean even further interest rate drops by the Bank of Canada? Can gasoline prices stay this low? These are the two questions to keep in mind with this data.

Inflation Data Table

Twitter Correction

My twitter link should be http://twitter.com/bigcajunman which I got wrong on my previous post, sorry guys.

That is the epilogue to the Bank of Canada rates dropping by 0.25% yesterday, so TD again shaves 0.1% more for their pockets, which I guess is to be expected now. The only way that TD might give back that 0.1% is if they find they are losing income from people with loans or lines of Credit taking these vehicles to other banking institutions (any suggestions can be added in my comments, I will investigate and report on them).

It’s interesting that TD announced their “prime” to be 4.00% however, their “prime to customers with allegedly prime lines of credit” is 4.35%? Interesting, and very annoying. Maybe they’ll change things today, we shall see, I guess.

Bad Day on the Markets

The Canadian Dollar dropped in reaction to the Bank of Canada Rate drop, which is good and bad for Canadians.

• Good because companies that export now have a much cheaper labor force and thus the price of their products in the U.S. should be cheaper. This is a good thing, and was one of the HUGE issues with a very high Canadian Dollar.
• Bad if you import or buy lots of stuff (like stocks) from the U.S.

Post Number 1000

The Bank of Canada lowered it’s overnight rate by 1/4% this morning. 

Given the pundits were asking for 1/2 % it is interesting to see that this is only a 1/4% cut, but this is how they explain it:

Three major interrelated developments are having a profound impact on the Canadian economy. First, the intensification of the global financial crisis has led to severe strains in financial markets. The associated need for the global banking sector to continue to reduce leverage will restrain growth for some time. Second, the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession. Third, there have been sharp declines in many commodity prices. The outlook for growth and inflation in Canada is now more uncertain than usual.

Interesting to see now if the banks reflect this drop?

What do you think?

As usual on the day that the Bank of Canada is about to announce an interest rate change, I typically wait until that is announced, but today, I’ll simply “flash” that information when it is available at 9:00 AM ET. 

The prognosticators are saying this is most likely another 1/2 point drop, however, whether the large banks follow suit or reflect the entire 1/2 point drop, is another story completely, as we have seen, some banks are attempting to help their margins by expanding the working area for their borrowed moneys (Toronto Dominion for one).

Bank Rate Since 2000?

Here is an interesting graph, using the data from the Bank of Canada’s web site. It shows the key overnight rates over the past 8 years, interesting to see how low rates have been and yet still there is problems with high interest rates causing folks to have problems with their debt loads?

The graph is missing the last 1/2 point drop that happened earlier this month (apologies for the inaccuracy, I am just figuring out how to do this stuff on the web).

Bank of Canada Overnight Rates since 2000

Deflation?

Now that Gasoline prices have dropped by about 30% in Ottawa, here is an interesting question, are we now in a deflationary period? Will all the surtaxes and rate increases levied because of high gasoline prices be lowered now? Will I ever answer these rhetorical questions? Anyone care to comment?