Major News This Week : October 28, 2013

Last Wednesday the Bank of Canada maintained its key interest rate at 1%. This came as no surprise, since the rate has not budged since September 2010. At the same time the Bank lowered its growth outlook, reducing its projection of real GDP growth from 1.8% to 1.6% in 2014 and from 2.7% to 2.3% in 2014. The Bank considers that maintaining the current monetary policy is appropriate, given the slower projected rates of economic growth. In the U.S., employment figures for September were finally released on Tuesday following a 20-day wait! The Unemployment Rate fell 0.1% to 7.2%, as only 148,000 positions were created during the month. This was 32,000 jobs short of analysts’ expectations. The loonie suffered this week, losing close to 2% of its value. Have a good week!

The Loonie

“If you do something, expect consequences.” - Larry King

The Governor of the Bank of Canada (BoC), Stephen Poloz, changed his position this week. For this edition of The Loonie, we will be taking a closer look at the press release that accompanied the BoC’s Key Interest Rate decision and analyzing the impacts of this change on the Canadian market. The BoC confirmed that it expected slightly slower growth in Canada over the next few years, reducing its projection of real GDP growth in 2014 from 2.7% to 2.3%, for example. This represents a dramatic change in the BoC’s position on Canada’s key interest rate. Previously, its press releases led us to believe that a rate increase was in the cards, which had the dual effect of preparing financial markets for rate increases and calming the real estate market, which seems to have benefited substantially from historically low rates. This therefore represents a major reversal on the Bank’s part. At the end of its October 23 report, it says that “the Bank judges that the substantial monetary policy stimulus currently in place remains appropriate.”

To Read the Entire Report Please Click on the pdf File Below.