Market Commentary
Economy and Interest Rates Dec 2013
December 4, 2013 | Posted by: Francine Tracey
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Recently the Bank has announced that interest rates will not likely move throughout 2014. The Bank continues to use other forms of credit tightening to control inflation, including stricter terms imposed on the mortgage market this month. This includes changes to mortgage securitization with the Bank proposing MBS auctions which may drastically affect the cost of borrowing for small lenders…potentially quashing them from the current market supply chain.
We have seen a weaker Canadian dollar of late…hovering around .93-94. This is largely due to the Banks statement that interest rates would NOT increase, a slowing of demand from China, and a trade deficit developing with the US due to a weaker than expected recovery from this, our most significant trading partner. Goldman Sachs went as far as to predict the Canadian dollar would fall to .88 but I find it hard to trust these comments, that often are self-serving, and how do we any longer trust? I believe with the dollar floating at a lighter weight we will see the trade deficit improve and things normalizing around this mark. I’m not ready to weight out my portfolio in US equities quite yet.