The Bank of Canada may announce an interest rate cut at its next meeting on Wednesday, a growing number of economists say.
The central bank has kept rates steady since Oct. 24, 2018, but analysts believe its next move will likely be a cut as the economy faces a number of headwinds including the COVID-19 outbreak, dropping oil prices and transport disruptions.
RBC economists are now forecasting a cut of a quarter of a percentage point, from 1.75 per cent to 1.50 per cent, at the Wednesday meeting.
“The plunge in global equity markets and sharp drop in commodity prices, in particular oil, are bumping up the risks that the confidence hit in financial markets will be mirrored in household and business sentiment,” RBC deputy chief economist Dawn Desjardins wrote in a memo on Friday.
2:35 Trump says media trying to make novel coronavirus look bad
Trump says media trying to make novel coronavirus look bad
On Feb. 28, U.S. and Canadian financial markets ended what turned out to be the worst trading week since the financial crisis of 2008 amid fears that a coronavirus pandemic will trigger a global recession.
Story continues below advertisement
Stocks bounced back sharply on both sides of the border on Monday, as investors’ focus turned to news that governments and central banks would step in to prop up the economy.
The Dow Jones Industrial Average surged more than 700 points, while the benchmark S&P 500 climbed 2.2 per cent, placing it on track for its best day since January 2019, as of 1:57 p.m. ET. The S&P 500 is coming off a weekly loss of 11.5 per cent.
Canada’s S&P/TSX composite index also clawed back some of the lost ground, rising 174 points, or 1 per cent, to 16,440 as of 1:45 p.m. ET.
The recent market jitters come on top of an already shaky economic performance for Canada. Growth slowed to an annualized rate of 0.3 per cent in the last three months of 2019, the worst performance in almost four years, thanks in part to rail strikes, bad weather and pipeline shutdowns, Statistics Canada said on Friday.
Coronavirus fears are also affecting commodity markets, with oil prices tanking around 15 per cent last week on fears that a global slowdown would reduce the world’s demand for oil. On Monday, benchmark U.S. crude was up US$1.89 to US$46.65 per barrel. Brent, the international standard, rose US$1.88 to US$51.55.
Story continues below advertisement
An interest rate cut by the Bank of Canada could help boost investors’ moods and shore up confidence among consumers and businesses, Desjardins wrote.
BMO economists are calling on the central bank to cut rates for a quarter of a percentage point at its April 15 meeting, with another such move in June. However, “if markets continue to melt down over the next few days, the odds might just tilt toward a March cut,” BMO economist Robert Kavcic wrote in a note to clients on Monday morning.
2:08 COVID-19 prompts new warnings in U.S.
COVID-19 prompts new warnings in U.S.
A rate cut in Canada could come as part of a concerted effort by central banks around the world to contain the economic impact of the coronavirus health scare.
The International Monetary Fund and World Bank announced simultaneously Monday that they are ready to help countries affected by the coronavirus through their emergency lending programs and other tools.
“We will use our available instruments to the fullest extent possible,” said IMF managing director Kristalina Georgieva and World Bank President David Malpass in a joint statement. “International co-operation is essential.”
1:12 How COVID-19 may impact your pocketbook
How COVID-19 may impact your pocketbook
The statement echoed similar promises to act if necessary from some central banks, starting with the Federal Reserve on Friday and the Bank of Japan over the weekend. Some analysts now speculate that the Fed could cut rates sometime this week, before its next formal meeting March 17-18.
Story continues below advertisement
Traders have priced in a 100 per cent probability that the Fed will cut rates by a half-percentage point during or before its March meeting.
Goldman Sachs is forecasting sharp interest rate cuts by central banks in the U.K., Australia, India and South Korea, in addition to Canada and the U.S.
Also, the Organisation for Economic Co-operation and Development, a research organization made up of mostly advanced economies, cut its world growth forecast in a report Monday.
The OECD said that even if there are only limited outbreaks outside China, the global economy will grow just 2.4 per cent this year, the weakest since the financial crisis in 2009. That forecast matches several private estimates.
If other countries are hit with outbreaks similar to China’s, growth could fall as low as 1.5 per cent, the OECD said.
The JP Morgan Global Manufacturing index posted the steepest drop last month since the recession year 2009. The index plunged to 47.2, lowest since May 2009, pulled down by cratering production in China.
Two new surveys showed a sharp drop in Chinese manufacturing in February as anti-virus controls shut down the world’s second-largest economy, but companies are confident activity will revive following government stimulus efforts.
Story continues below advertisement
Given that the main economic impact so far of the virus outbreak is on the supply side of economies rather than on the demand side, questions are being asked as to whether looser monetary policy will have any meaningful impact.
“Monetary policy is generally not highly effective in resolving supply-side shocks,” TD economist Beata Caranci wrote in a report on Monday. Fiscal policy, on the other hand, is effective “when targeted at the source of the supply shock,” she added.
However, she wrote, if quarantines spur a fear-based reaction among households, “then monetary policy needs to step in” in addition to fiscal policy.
— With files from the Associated Press and the Canadian Press
EDMONTON – RCMP say a second suspect has been arrested in the killing of an Alberta county worker.
Mounties say 28-year-old Elijah Strawberry was taken into custody Friday at a house on O’Chiese First Nation.
Colin Hough, a worker with Rocky View County, was shot and killed while on the job on a rural road east of Calgary on Aug. 6.
Another man who worked for Fortis Alberta was shot and wounded, and RCMP said the suspects fled in a Rocky View County work truck.
Police later arrested Arthur Wayne Penner, 35, and charged him with first-degree murder and attempted murder, and a warrant was issued for Strawberry’s arrest.
RCMP also said there was a $10,000 reward for information leading to the arrest of Strawberry, describing him as armed and dangerous.
Chief Supt. Roberta McKale, told a news conference in Edmonton that officers had received tips and information over the last few weeks.
“I don’t know of many members that when were stopped, fuelling up our vehicles, we weren’t keeping an eye out, looking for him,” she said.
But officers had been investigating other cases when they found Strawberry.
“Our investigators were in O’Chiese First Nation at a residence on another matter and the major crimes unit was there working another file and ended up locating him hiding in the residence,” McKale said.
While an investigation is still underway, RCMP say they’re confident both suspects in the case are in police custody.
This report by The Canadian Press was first published Sept. 13, 2024.
RICHMOND, B.C. – The Integrated Homicide Investigation Team says the 26-year-old son of a man found dead on British Columbia’s Sunshine Coast has been charged with his murder.
Police say 58-year-old Henry Doyle was found badly injured on a forest service road in Egmont last September and died of his injuries.
The homicide team took over when the BC Coroners Service said the man’s death was suspicious.
It says in a statement that the BC Prosecution Service has approved one count of first-degree murder against the man’s son, Jackson Doyle.
Police say the accused will remain in custody until at least his next court appearance.
The homicide team says investigators remained committed to solving the case with the help of the community of Egmont, the RCMP on the Sunshine Coast and in Richmond, and the Vancouver Police Department.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, have broken off without an agreement following 15 hours of talks.
Joe McCann, president of Amalgamated Transit Union Local 1724, says they stayed at the bargaining table with help from a mediator until 2 a.m. Friday and made “some progress.”
However, he says the union negotiators didn’t get an offer that they could recommend to the membership.
McCann says that in some ways they are close to an agreement, but in other areas they are “miles apart.”
About 600 employees of the door-to-door transit service for people who can’t navigate the conventional transit system have been on strike since last week, pausing service for all but essential medical trips.
McCann asks HandyDART users to be “patient,” since they are trying to get not only a fair contract for workers but also a better service for customers.
He says it’s unclear when the talks will resume, but he hopes next week at the latest.
The employer, Transdev, didn’t reply to an interview request before publication.
This report by The Canadian Press was first published Sept. 13, 2024.
