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