Posted by: Daryl & Wendy Ashby | September 9, 2011

How Are We Doing?

You may or may not be interested in our Global economy, but you should have at least a mild interest. What happens globally, affects us all, investor, entrepeneur, retiree and career professional alike.
It wasn’t too much of a concern as to whether they were going to change the rate, but more so what Carney said about the state of Canada’s economy, the global economy, and in turn, how we fit into the mix and how we’ll move forward.At the last meeting in July, everyone was pretty sure that the next time we heard an announcement from the Bank of Canada that we’d be talking rate changes.How quickly things change. Not only did the central bank leave rates as-is, Carney’s tone was quite reserved, notable stating that the ‘need to withdraw monetary stimulus has diminished’ – basically saying that there’s no need to increase rates at this time.

The bank also highlighted the fact that global economy has deteriorated severely since July. US growth is expected to be nil, and they had zero net job gains last month.

But not only that, they need to add approximately 125,000 a month to keep pace with its population and increase worker participation rates.

In Europe, the sovereign debt crisis has gotten worse and volatility is a way of life there right now.

The Canadian economy also retracted during the second quarter, but this is seen as temporary since some of the contributing factors were the natural disasters in Japan and the wildfires and annual summer shut down for maintenance in the oil patches in Alberta. However, the Bank feels that we will rebound the rest of the year, although our strong dollar is providing some headwinds to our growth because export demand is down

.Even though the gloomy tone is due to the factors stated above, Carney didn’t mention if or how any monetary policy will change in the near future.

It appears that interest rates will remain low for the foreseeable future, barring any unexpected events.A common question asked by many is whether or not interest rates will be cut any further?Carney didn’t elaborate too much on cutting interest rates, probably due to the fact that things are expected to turn around in the last two quarters of the year, and with prolonged low rates, spending should remain stimulated.

However, if the US slips into another recession we may see rates drop further.

If all things play out as anticipated, we’ll most likely see rates stable at current levels until mid-2012, but again, the last time the Bank of Canada made an announcement everyone thought that rates were going to be on their way up this time around. Ultimately, all we can do is wait and see.


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