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Bank of Canada’s Poloz more optimistic about global economy

Andrea Hopkins
18:59 EST Friday, Apr 15, 2016

WASHINGTON — Bank of Canada Governor Stephen Poloz said on Friday that he was more encouraged about the state of the global economy after hearing from his G20 colleagues at the spring meeting of the group than he was heading into the discussions.
In holding key overnight rates steady this week, the Bank of Canada said in its Monetary Policy Report that weaker global growth was one of the biggest downside risks to Canada’s export-driven economy.
“I think compared to when we were in Shanghai (in February), people were in a more positive frame and I think that has partly to do with markets having gone into a slightly calmer phase, but also some better numbers have come in,” Poloz told reporters in a joint news conference with Finance Minister Bill Morneau, noting that China’s first-quarter data was in line with expectations.
“That is the kind of thing that is reassuring. So I come away feeling a little bit more encouraged, I would say, than when I arrived,” he said.
Morneau agreed that the “tone and tenor” from colleagues around the table was better than two months earlier at the Shanghai meeting.
Noting the divergence in inflation risk between the United States and Canada, Poloz said the risk of an overshoot in inflation is “pretty far away” for Canada and that the U.S. economy is “quite a bit ahead of us.”
While investors expect the U.S. Federal Reserve to raise rates later this year, Canada could hold official interest rates at 0.50 per cent – near a historic low – into 2017.
Poloz also dismissed the suggestion that a recent rise in the price of oil to about $40 (U.S.) a barrel from $30 a barrel previously was a bad thing for the Canadian economy because it could make exports less competitive by helping to push up the value of the Canadian dollar.
“A drop in oil prices is unambiguously negative for the Canadian economy, all things considered,” Poloz said.
He also said that global central banks still have tools to ease monetary policy if needed.
“There is pretty general agreement amongst the central bankers that we all have ammo, as you put it, we have room to manoeuvre. I guess it is fair to say we’ve discovered we have more room to manoeuvre than we thought we had five years ago in the way of the financial crisis,” Poloz said.

Psst, Bank of Canada watchers, don’t look for a rate hike until late 2017

The Bank of Canada held interest rates today and raised its growth outlook, but only grudgingly, economists say.
The uptick from 1.4 per cent to 1.7 per cent growth was close to the federal government’s own forecast and took into account the big burst of stimulus to come. But economists say the report was full of signs that there would be little momentum in the economy without the boost from new government spending.

“The BoC had to upgrade growth today, but they wanted to convey a very clear message: the economy is not out of the woods yet,” said Bank of America economists.

That said, most economists don’t see a rate hike until the later part of next year, with some seeing a rate cut later this year.

To read full article please click on the link below
http://www.financialpost.com/m/wp/blog.html?b=business.financialpost.com/news/economy/psst-bank-of-canada-watchers-dont-look-for-a-rate-hike-until-late-2017

Fed should proceed ‘cautiously’ given global risks, Yellen says

Jonathan Spicer and Jennifer Ablan
12:24 EST Tuesday, Mar 29, 2016

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NEW YORK — Federal Reserve Chair Janet Yellen said on Tuesday the U.S. central bank should proceed “cautiously” as it looks to raise interest rates again, because inflation has not yet proven durable against the backdrop of looming global risks to the U.S economy.
In her first comments since the Fed decided to hold rates steady two weeks ago, Yellen again sounded cautious tones about threats to the recovery of the world’s biggest economy, appearing to push back on more hawkish recent comments from a handful of her colleagues.
“Developments abroad imply that meeting our objectives for employment and inflation will likely require a somewhat lower path for the federal funds rate than was anticipated in December,” when the Fed raised rates for the first time in a decade, Yellen said at the Economic Club of New York.
“Given the risks to the outlook, I consider it appropriate for the Committee to proceed cautiously in adjusting policy,” Yellen said, referring to the policy-setting Federal Open Market Committee.
At its March policy meeting, the Fed had nodded to an overseas slowdown and early-year market turmoil in justifying a pause to planned policy tightening. Fed policymakers at the time also downgraded economic expectations and predicted only about two more rate hikes this year.
On Tuesday Yellen said she still expected that headwinds from weak growth abroad, low oil prices and uncertainty over China would abate and allow the recovery to continue.
“This expectation of fading headwinds,” she said, is a key reason policymakers expect that “gradual increases” in rates will be appropriate. “The overall fallout for the U.S. economy from global market developments since the start of the year will most likely be limited,” Yellen said.
U.S. stocks and Treasury securities prices turned positive while the dollar dropped to a one-week low after Yellen’s comments. The yield on the 10-year Treasury note traded at 1.82 per cent.
U.S. inflation measures have shown some strength, with the Fed’s preferred annual measure flat at 1.7 per cent in Februarythough still below its target of 2 per cent. Another closely watched 12-month measure was up 2.3 per cent from a year ago.
Yellen however remains cautious. “It is too early to tell if this recent faster pace will prove durable,” she said, echoing her concerns from March 16.
The decent economic data at home, the rebound in oil prices, and relative tranquility in global markets have prompted some other Fed officials to suggest another rate hike could come in April or June. San Francisco Fed President John Williams, a close ally of Yellen, said earlier on Tuesday the central bank should stay on track with its tightening plan.

Bank of Canada holds rates steady; says market volatility abating

BARRIE McKENNA
10:07 EST Wednesday, Mar 09, 2016

The economic pieces are starting to fall into place for Stephen Poloz, giving the Bank of Canada governor latitude to keep the bank’s key interest rate unchanged.
Many of the dark clouds that have hung over Mr. Poloz’s decision-making in recent months have begun to clear. Exports are rebounding, fear of a global recession is fading and the battered price of oil is on the upswing again. The federal government is also poised to inject a hefty dose of fiscal stimulus to help revive the sluggish economy in its March 22 budget.
As a result, the central bank opted to keep its key overnight interest rate unchanged at 0.5 per cent Wednesday – where it’s been since last July when it cut rates for the second time in 2015.
“The global economy is progressing largely as the bank anticipated in its January Monetary Policy report,” the bank said in a statement accompanying the rate announcement.
Mr. Poloz and other bank officials have generally welcomed the prospect of more fiscal stimulus from Ottawa, which is expected to announce a multi-year boost to infrastructure spending.
Among other things, the bank said recent inflation pressures will “likely unwind” in the months ahead, core inflation is “at or just below” its 2-per-cent target, non-energy exports are gathering momentum, prices of oil and other commodities have rebounded and GDP growth was better than feared in the fourth quarter (at 0.8 per cent). Consumer spending also continues to “underpin domestic demand.”
All that has helped calm investor angst.
“Financial market volatility, reflecting heightened concerns about economic momentum, appears to be abating,” the bank said. “Although downside risks remain, the bank still expects global growth to strengthen this year and next [and] the U.S. expansion remains broadly on track.”
Both the price of oil (at roughly $37 U.S. per barrel) and the Canadian dollar (just below 75 cents U.S.) are close to levels the bank forecast in January, the statement pointed out.
Still, the bank remains concerned about a number of things, including still “very weak” business investment due to massive retrenchment in the oil sands as well as rising “financial vulnerabilities.”
“Financial vulnerabilities continue to edge higher, in part due to regional shifts in activity associated with the structural adjustment underway,” the bank said.
Parts of Western Canada are in recession, triggering tumbling real estate prices, rising bankruptcies and an outflow of workers drawn to Alberta’s once-booming economy. The housing market remains red-hot in Vancouver and Toronto, creating fears about affordability and an eventual price collapse.
In January, the bank forecast growth of 1.5 per cent this year in Canada and 2.5 per cent next year. The bank’s next forecast is due out April 13, which will include an assessment of the impact of Ottawa’s stimulus plan.
“The Bank of Canada tried to say as little as possible today as it waits to see what stimulus the federal budget delivers,” CIBC World Markets said in a research note.

Five things you need to know about your RRSP as this year’s deadline approaches

OTTAWA — Recent volatility on the markets has bruised RRSP investments. As the Feb. 29 deadline for contributions looms, here are five things to know about RRSPs:

To continue reading this article, please click on the link below:
http://business.financialpost.com/personal-finance/five-things-you-need-to-know-about-your-rrsp-as-this-years-deadline-approaches


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