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Do you guys think the Feds will now lower the interest rate?

  • Last Updated:
  • Nov 29th, 2018 3:45 pm
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Do you guys think the Feds will now lower the interest rate?

In light of oil being sold out west for $15 a barrel and GM's Oshawa plant closing in Ontario, do you guys think the feds might consider either holding the rate steady or even lowering it? I don't know about you guys but I am extremely concerned about our economic state here in Canada. There is also the ridiculous $17 billion corporate bailout in the current federal budget that gets tacked on directly onto our already massive federal budget deficit. I realize that money is in response to the Trump tax cuts. But it doesn't really make it an easier pill to swallow IMO.

I'm concerned we are going to wind up like Greece. Massive debt with no way to pay for it. Perhaps you guys see it differently. But I see the vultures circling. Perhaps a new PM is what we need. And quite honestly Trudeau did the best he could; he didn't really make any glaring errors. He will probably take the fall for this, for better or for worse. To me there had to be a way for him to get all three pipelines built without disruption. I don't understand why he doesn't do something like impose a 3% pipeline oil tax with that money being given entirely to the Aboriginals and also other affected communities. It would solve the entire problem. What's worse for the oil industry, $15/barrel oil or a 3% pipeline tax? I think they would happily pay the tax at this point if it meant they could get $60/barrel for their oil (proper market value). In terms of NAFTA I don't know what to say. Perhaps Trump hoodwinked him. The big red flag for me was the lack of an ability to make a deal with China. We'll see.
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SickBeast wrote:
Nov 27th, 2018 6:43 pm
In light of oil being sold out west for $15 a barrel and GM's Oshawa plant closing in Ontario, do you guys think the feds might consider either holding the rate steady or even lowering it? I don't know about you guys but I am extremely concerned about our economic state here in Canada. There is also the ridiculous $17 billion corporate bailout in the current federal budget that gets tacked on directly onto our already massive federal budget deficit. I realize that money is in response to the Trump tax cuts. But it doesn't really make it an easier pill to swallow IMO.

I'm concerned we are going to wind up like Greece. Massive debt with no way to pay for it. Perhaps you guys see it differently. But I see the vultures circling. Perhaps a new PM is what we need. And quite honestly Trudeau did the best he could; he didn't really make any glaring errors. He will probably take the fall for this, for better or for worse. To me there had to be a way for him to get all three pipelines built without disruption. I don't understand why he doesn't do something like impose a 3% pipeline oil tax with that money being given entirely to the Aboriginals and also other affected communities. It would solve the entire problem. What's worse for the oil industry, $15/barrel oil or a 3% pipeline tax? I think they would happily pay the tax at this point if it meant they could get $60/barrel for their oil (proper market value). In terms of NAFTA I don't know what to say. Perhaps Trump hoodwinked him. The big red flag for me was the lack of an ability to make a deal with China. We'll see.
Nope, Bank of Canada already said they don't care about oil price and with record low unemployment, Oshawa won't even register to them

Our debt to gdp has been falling under liberals and we are in much better financial shape than any other G7 country in terms of debt

The pipelines are a fantasy if you think it'll help with getting our tar sludge out. There's no demand for it with how much light/better crude is out there. A pipeline with no demand is just a white elephant

Why do you think a pipeline will help at all when there's no demand to begin with? We need oil back near triple digits to get demand going for our much inferior product. A pipeline would definitely help if oil ever goes back up to triple digits but that's unlikely with so much shale production in the US now
Last edited by Gboard2 on Nov 27th, 2018 6:50 pm, edited 3 times in total.
[OP]
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Gboard2 wrote:
Nov 27th, 2018 6:45 pm
Nope, Bank of Canada already said they don't care about oil price and with record low unemployment, Oshawa won't even register to them

Our debt to gdp has been falling under liberals and we are inich better financial shape than any other G7 country in terms of debt
Thanks for that. I hope you are right. Quite honestly that seems like cherry picking certain stats. But I will take you at your word.
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SickBeast wrote:
Nov 27th, 2018 6:47 pm
Thanks for that. I hope you are right. Quite honestly that seems like cherry picking certain stats. But I will take you at your word.
Debt and gdp aren't cherry picking. If you want to talk about debt/deficit to gdp, we are about 1/3 of the US and much lower than other G7 countries.

Of course the US can run much higher debt/deficit to gdp as they have reserve currency and where else is anybody going to to go for "safety"

If housing and defaults occur , then you'll see BoC lowering rates but gas price and a few thousand jobs at Oshawa with strong economic backdrop overall wont lead to rate cuts

I mean Accenture today just announced 800 jobs for their new technology hub in Toronto. Along with all the new jobs in Toronto, Oshawa is just a headline for a day

https://www.thestar.com/business/techno ... n-hub.html
[OP]
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Gboard2 wrote:
Nov 27th, 2018 6:52 pm
Debt and gdp aren't cherry picking. If you want to talk about debt/deficit to gdp, we are about 1/3 of the US and much lower than other G7 countries.

Of course the US can run much higher debt/deficit to gdp as they have reserve currency and where else is anybody going to to go for "safety"

If housing and defaults occur , then you'll see BoC lowering rates but gas price and a few thousand jobs at Oshawa with strong economic backdrop overall wont lead to rate cuts

I mean Accenture today just announced 800 jobs for their new technology hub in Toronto. Along with all the new jobs in Toronto, Oshawa is just a headline for a day

https://www.thestar.com/business/techno ... n-hub.html
Keep in mind that the GM plant closure is ~3,000 direct jobs lost and another ~21,000 related jobs lost (supply chain, etc.). So no, 800 tech jobs absolutely do not make up for this. Not even close. This is a big deal. I don't think we should dance around that fact or minimize it because it may be convenient or make us feel better.
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Feb 13, 2017
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By "Feds" I'm assuming you're talking about the Bank of Canada and not the U.S. Federal Reserve.

Nonetheless, with U.S. inflation creeping up the past 30 months and the weakening Canadian dollar, neither the U.S. Federal Reserve or Bank of Canada will lower interest rates.
Deal Fanatic
Apr 11, 2012
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Winnipeg
BoC needs the cushion to cut interest rate when a real recession comes around.
So I don't think they will cut right now. But the pace of increase may be gradual.
Also in the past interest rates have followed the US rates.
Also I heard the mandate of BoC is under review...
Personally I like higher interest, so the RE market can stabilize and we can earn a decent return on savings.
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Feb 15, 2006
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With the inflation rate above 2%, low employment, and pretty good economy (even though energy section is suffering), and strong US $, no BOC will not cut rates. They may slow down the rate increases. But rates are still on the path up.
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Aug 31, 2014
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it might not go up as fast but it's definitely going up......I think they wont increase again until next year 1st quarter
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Nov 26, 2012
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SickBeast wrote:
Nov 27th, 2018 7:18 pm
Keep in mind that the GM plant closure is ~3,000 direct jobs lost and another ~21,000 related jobs lost (supply chain, etc.). So no, 800 tech jobs absolutely do not make up for this. Not even close. This is a big deal. I don't think we should dance around that fact or minimize it because it may be convenient or make us feel better.
The problem with this thinking is that it is wholly Ontario centric. You have to realize that most other provinces do not care that one company closed one plant in Ontario. What is the impact on the overall *Canadian* economy - is it that significant? is it even a trend in the auto industry that needs to be addressed? I'm not sure about that. We can see how Toyota or Ford sees this news.

As a reference, the oil industry laid off or did not rehire a lot of people in Alberta with corresponding ripple affect in suppliers and tertiary services. This had significant impact on an entire province. At the end of the day BoC still raised interest rates several times.
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Jan 5, 2015
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I hope they increase the interest rates... it almost feels like the BoC makes excuses for holding them steady.
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May 16, 2017
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Taikonaut wrote:
Nov 28th, 2018 10:42 am
I hope they increase the interest rates... it almost feels like the BoC makes excuses for holding them steady.
The BoC has reasons, not excuses; which is why you keep politicians from having direct control over the central bank, they would raise rates to make some short-term vote gain with a target segment of the population to the long-term detriment of the economy. See Venezuela, Congo and even Argentina for current examples of disastrous political meddling in the economy.
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Nov 15, 2004
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Yeah, let's lower the interest rate again so people can resume living on debt without ever planning on how to repay it. Maybe drop the rate into the negatives to really **** over those who work hard and save without living their entire lives on other people's money!

Rates needed to rise long ago and it's high time they did. People need to be held accountable for their lifestyles and break themselves of their addiction to borrowing.
Could HAVE, not could OF. What does 'could of' even mean?
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I believe there is a chance the Feds could drop interest rates. I'm invested in the Canadian preferred share market, the performance of which is closely tied to the 5 year Canada bond. In recent weeks, 5 yr rates have dropped about 20 bps, which doesn't sound like alot, but enough to tank the pref market to 52 week lows. This is a sign of risk-off trading, reflecting our current economic condition (low oil, pipeline gridlocks, GM Oshawa etc.). Although its not often mentioned, I believe the Feds take their cue from the mid/long bond actions. Although the Fed can control bonds at the short end through monetary policy, they have no control over mid/long rates. A move now to raise rates at the short end will risk inverting the yield curve and throw the economy into a recession if not headed there already. This is why I think the Feds will keep rates steady and even lower them if things head south.

It's wise to not always believe in the narrative that the media is spinning...
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Oct 6, 2015
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There's nothing in the proverbial 'pipeline' (no pun intended) to replace the now collapsing real estate industry and O&G industries as a source of demand. There is a massive debt overhang. The Bank of Canada has recently begun buying mortgage bonds, which is a form of QE. It seems very likely that the Bank of Canada not only will be on hold, but will probably be forced to cut. The Bank of Canada was 'supposed' to deliver 2% annual inflation, but they've held interest rates so high that inflation was only 1.6%/year over the past decade.

A common misperception is that "interest rates" determine the return on the "savings" of a 'saver'. This is a very amateur and quite incorrect way of viewing things. The lower inflation, lower interest rate environment is far better for a cash 'saver' than higher rates. And because Poloz has held rates so high, a windfall has been delivered to cash savers as inflation was only 1.6%, not 2% as it usually is 'supposed' to be.

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