Stephen Poloz has not ruled out a future cut to interest rates

“Bank of Canada governor Stephen Poloz says he has not ruled out a future cut to interest rates despite his belief that the global and Canadian recoveries are picking up steam and that disinflationary pressures appear to be waning. The head of Canada’s central bank made the comment after it decided to keep the trendsetting overnight rate at 1% for the 29th time in a row since September 2010. The bank also pared back its estimate for first-quarter economic growth by a full point to 1.5% — mostly because of the severe winter weather that began in December — and 2014 growth to 2.3% from 2.5. But in its overall assessment, the Bank of Canada’s new monetary policy report appeared to reflect a growing confidence in the global economic recovery and less concern about persistent low inflation and an overly hot housing sector.” Julian Beltrame of the Canadian Press wrote for the Financial Post. Beltrame continued, “still, Poloz said in a teleconference from Toronto — where he was to attend former finance minister Jim Flaherty’s funeral in the afternoon — that considerable risks remain, including the possibility that Canadian exports won’t recover fully and the potential for a political shock from Ukraine’s difficulties with Russia. ‘We are neutral, that means a rate cut cannot be taken off the table at this stage,’ Poloz said. ‘It will depend on the data.’ The central bank has set an ideal target of annual inflation at 2.0% but considers it acceptable within a range of between 1.0% and 3.0%.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS  

Jim Flaherty’s death leaves a void in Conservative party

“The outpouring of grief among MPs these past days, as Parliament Hill comes to grips with the death of one of its finest, Jim Flaherty, has been extraordinary – a moment that has brought them together in shared loss, as sometimes happens with families. For now, more unites them than separates them. For a little while the veil of partisanship and manufactured outrage falls; they are just people, who’ve lost a friend. But as the country prepares for the former finance minister’s state funeral Wednesday, it’s worth asking whether there’s more to the sense of collective mourning, particularly among Conservatives, than the purely personal.” Michael Den Tandt wrote in an article for the Ottawa Citizen. Den Tandt continued, “Flaherty was, as all the eulogies last week made so clear, a human being, who never allowed his humanity to be eclipsed by the importance of his station. He loved a beer, loved a joke, was kind to colleagues, was warm, and decent. Though he operated on a different plane of influence from most other MPs in the Commons, Flaherty put on no airs. ‘If you can talk with crowds and keep your virtue, or walk with kings, nor lose the common touch,’ reads the line from Kipling. Flaherty was also a man of deep compassion, evidenced by his long championing of the disabled, informed by his own experience of raising a son with a developmental disability. He believed it was his mission as finance minister to help ordinary working Canadians who were struggling to make ends meet. He was the antithesis of the pin-striped, aloof Bay Street banker. If one looks back to the Conservatives’ early success, in the Christmas campaign of 2005, it stemmed from an intuitive sympathy for working families, and an ability to express this in policy. The child fitness tax credit, derided as a geegaw by economic purists but appreciated by millions of parents, was the quintessential example.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS  

Fed minutes show few officials think forecasts exaggerate pace of rate hikes


  “Several Federal Reserve policy makers said a rise in their median projection for the main interest rate exaggerated the likely speed of tightening, according to minutes of their March meeting. ‘Several participants noted that the increase in the median projection overstated the shift in the projections,’ the minutes of the March 18-19 Federal Open Market Committee meeting showed. Some expressed concern the rate forecasts ‘could be misconstrued as indicating a move by the committee to a less accommodative reaction function.’ Treasury yields rose last month after policy makers predicted that the benchmark interest rate would rise faster than previously forecast. Janet Yellen, presiding over her first meeting as chair, later downplayed the importance of the forecasts, even as she said that rates might start to rise ‘around six months’ after the Fed ends its bond-purchase program.” According to Financial Post article by Bloomberg News. Article continued with “The Fed reduced the monthly pace of purchases by US$10 billion, to US$55 billion, and repeated it is likely to continue paring the program in ‘further measured steps.’ ‘Members agreed that there was sufficient underlying strength in the broader economy to support ongoing improvement in labor-market conditions,’ the minutes show. The FOMC next meets April 29-30. The committee last month scrapped its pledge to keep the main interest rate low at least as long as unemployment exceeds 6.5%, saying it will look at a broader range of data when considering when to increase borrowing costs. Fed officials predicted that the benchmark interest rate would rise faster than previously forecast. Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS  

IMF states Canadian economy will pick up speed

“Canada’s economy will pick up speed in 2014, thanks in great part to stronger growth in the United States, as both countries shake off a chilling start to the year, the world’s key lending agency said Tuesday. But the International Monetary Fund, in its latest analysis of global growth and trends, cautioned external risks still exist for both countries and urged the Bank of Canada, in particular, to hold off raising its key interest rate until solid growth takes hold. ‘Although external demand could surprise on the upside, downside risks to the outlook still dominate, including from weaker-than-expected exports resulting from competitiveness challenges, lower commodity prices, and a more abrupt unwinding of domestic imbalances,’ the Washington-based IMF said in its report.” Gordon Isfeld wrote for the Financial Post. Isfeld continued, “‘Indeed, despite the recent moderation in the housing market, elevated household leverage and house prices remain a key vulnerability. With inflation low and downside risks looming, monetary policy should remain accommodative until growth gains further traction.’ The Bank of Canada’s trendsetting lending rate has been at a near-record low of 1% since September 2010. In October, bank governor Stephen Poloz dropped the pro-rate-hike stance, saying instead that policymakers had adopted a neutral position — meaning borrowing costs could eventually go down if the economic data deteriorates.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

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