Economy begins to warm with summer

At the start of summer, the same time as the BoC nipped interest rates here, news was about an impending interest rate hike south of the border. Financial markets didn’t seem to take much notice here or in the U.S., with the focus on slipping oil prices.

By mid-August, headlines shifted to a stalling global economy, oil’s price plunge, the economic crisis in China, and here… the state of the Federal election race. As equity markets “yo-yoed”, some economics even began to speculate that the Bank of Canada may once again snip the key rate.

GDP numbers for the second quarter showed a slight economic contraction. But early indications are that the dust is beginning to settle. Yes, the price of oil continues to wobble on the lower-end of the scale. In contrast, recent economic numbers seem to indicate that many sectors are indeed doing better, thanks to our lower dollar. And the BoC decided to “stay the course” keeping the key rate at .5%, showing that they have confidence and are letting the economy gather momentum under its own steam.

It’s been quiet on the U.S. interest rate front as well. It seems that Ms. Yellen doesn’t want to cast the uncertainty into the stabilizing financial market. If our economy continues to grow, as many expect it to, next year we may well see both central banks test the waters by nudging rates up.

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Randy Ramadhin

Randy Ramadhin

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