Low oil prices a fac­tor in the Bank’s de­ci­sion to hold rate

Calgary Sun - - HOMES - Myke Thomas CAL­GARY SUN

The Bank of Canada (the Bank) left its overnight rate at 1.75 per­cent on Dec. 5., cit­ing, among other things, new trade deals, low oil prices and house­hold debt as rea­sons for its de­ci­sion.

In a state­ment, the Bank said, “The global eco­nomic ex­pan­sion is mod­er­at­ing largely as ex­pected, but signs are emerg­ing that trade con­flicts are weigh­ing more heav­ily on global de­mand. Re­cent en­cour­ag­ing de­vel­op­ments at the G20 meet­ings are a re­minder there are up­side as well as down­side risks around trade pol­icy.”

The Bank then ad­dressed an is­sue only too fa­mil­iar to Al­ber­tans.

“Oil prices have fallen sharply since the Oc­to­ber Mon­e­tary Pol­icy Re­port, re­flect­ing a com­bi­na­tion of geopo­lit­i­cal de­vel­op­ments, un­cer­tainty about global growth prospects, and ex­pan­sion of U.S. shale oil pro­duc­tion. Bench­marks for West­ern Cana­dian oil — both heavy and, more re­cently, light — have been pulled down even fur­ther by trans­porta­tion con­straints and a buildup of in­ven­to­ries. In light of these de­vel­op­ments and as­so­ci­ated cut­backs in pro­duc­tion, ac­tiv­ity in Canada’s en­ergy sec­tor will likely be ma­te­ri­ally weaker than ex­pected.”

The Cana­dian econ­omy and hous­ing mar­kets were men­tioned in the state­ment.

“The econ­omy as a whole grew in line with the Bank’s pro­jec­tion in the third quar­ter, al­though data sug­gest less mo­men­tum go­ing into the fourth quar­ter. Busi­ness in­vest­ment fell in the third quar­ter, in large part due to height­ened trade un­cer­tainty dur­ing the sum­mer. Busi­ness in­vest­ment out­side the en­ergy sec­tor is ex­pected to strengthen with the sign­ing of the USMCA.

“House­hold credit and re­gional hous­ing mar­kets ap­pear to be sta­bi­liz­ing fol­low­ing a sig­nif­i­cant slow­down in re­cent quar­ters. The Bank con­tin­ues to mon­i­tor the im­pact on both builders and buy­ers of tighter mort­gage rules, re­gional hous­ing pol­icy changes and higher in­ter­est rates.”

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