Over the past few weeks, all the hoopla and speculation whether Stephen Poloz Bank of Canada chairman has purposely weakened the Canadian dollar via his commentary whether or not Bank of Canada Interest Rates wil rise or fall? Can Mr. Poloz change previous monetary policies with a new path??
The answer…most definitely..we have to trace back to Stephen Poloz Bio and his employment history, 14 years with the Bank of Canada from 1981-1994 and in 1999 joining the BDC (Business Development Canada) where he became President and then CEO in 2010. Mr. Poloz has the “finger on the pulse” yet in the game of world central banks, he is just a “pawn” in scheme of a bigger picture.
The Yellenator (Janet Yellen) and the FED lead this game and whatever monetary policy is provided, the others will follow.
The U.S. FED will dictate their monetary “mantra” to others and leave an unlimited timeframe for others to follow. We have seen this pattern amongst other nations and now Canada has decided to follow the “pied piper”…whatever tune the “Yellenator” plays..the rest follow.
Canadian exporters have been begging for this recent fall for the CAD, yet previous chairman Mark Carney now chairman of Bank of England never participated. The question, is this current move more to do with dovish commentary or stronger U.S. data causing the weakness. Remember, Canada Exports by Country 85% tied with the U.S. The bigger picture, manufacturing in Canada will not claw back gains from a weaker CAD, Caterpillar, Heinz Canada have shown that to operate in Canada is costly, both organizations have brought business back to the U.S. or Mexico. Overall the U.S. cannot continue to inflate their economy to infinity. Sooner or later the game ends, the question is…which economies will remain resilient after the monetary game subsides??
Bank of Canada possibly lowering interest rates in Canada??
This topic has been circulating amongst Canadian economists, traders and even business media analysts for over the past few years pertaining to Bank of Canada Interest Rates. Since Mark Carney (former Bank of Canada chairman…presently BOE chairman) set the path for all Central banks to follow.back in 2011. Basically he froze rates and that structure has remained for the newly appointed Stephen Poloz Bank of Canada chairman. In fact, the FED has not risen their rates and the RBA in Australia has changed their strategy to slash their interest rates.
The hype of interest rate hikes has allowed the 6 big Canadian banks to capitalize and sway Canadian homeowners on interest rates and lock in fixed rates for 3 or 5 years. Variable rates considered risky, yet now those who have variable rates will benefit further from a lowering of rates.
The real picture is that the Canadian consumer could not handle another rate hike due to over-leveraging on various debt products, credit cards, multiple loans i.e. mortages, student loan, car loans. To raise rates would be suicidal for the Canadian economy. Of course growth for an economy starts with supply and demand. Currently, the only demand we see here in Canada mainly from international investors parking their funds here as a safe haven and purchasing condominiums and newly built homes. The average Canadian willing to request a new loan from their local bank either for a small business or to purchase another home etc…has more stringent rules applied to meet the criteria.
Poloz announcement last week is nothing new to myself or others, Canada’s economy will continue to stagnate as the US is not our “saving grace” to prosperity once more. Canadian companies are sitting on hoards of cash reserves and until “uncertainty” in the market plagues investors, Canada will remain in a “turtle paced” economy.
If BOC possibly lowers Interest Rates, Poloz should make the decision prior to the first quarter of 2014, as it will allow Canadians to make further payments on their existing loans and breathe easier. Maybe if your lucky Mr. Poloz the average Canadian might have less debt and pay back their loans..wouldn’t that be the ideal situation for Canada??