Canadian Personal Finance Blog

Stats Canada published the Consumer Price Index for September is at 3.4% which is a 0.1% drop (in increase) from August’s numbers.

A full explanation from Stats Canada says:

The CPI excluding gasoline increased 2.2% in the 12 months to September; stripping away all energy components, the CPI advanced 1.9%.

Of the eight major components of the CPI, shelter costs remained the primary contributor to the 12-month increase in consumer prices in September. Food costs replaced transportation as the second leading contributor. Transportation costs, now third, continued to be buoyed by higher gasoline prices, although lower prices for vehicles have had a moderating effect.

Increasing costs for mortgage interest, natural gas and fuel oil and other fuels continued to propel costs for shelter. Nearly all food items registered price increases, but bread and cereal products, fresh fruit and vegetables and dairy products contributed significantly to higher food prices in September.

So if you are to believe the numbers inflation without oil isn’t too bad, but with oil prices added things are not quite so good. Given the free fall in the price of gasoline and oil, will we start seeing a big drop in Inflation, or even Deflation soon? Good question.

Black Friday for Stocks?

Futures for all American indexes are way down and it looks like another Black sell off Friday ahead for investors. More bargains to be had, but for those holding stocks, more money going out the window, for now.

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?