Although there’s consensus that interest rates are rising, economic headwinds continue hampering the Bank of Canada’s ability to implement hikes.
The central bank yesterday decided to hold the key rate at 1.75% because gales both domestic and international carry concerns that global economic expansion is decelerating. The United States has been embroiled in trade wars all year, while oversupplied Canadian crude reels from lame pricing.
“The Bank of Canada’s announcement (yesterday) is similar to the policy announcement in October 2018, but the Bank has moderated its stance,” said James Laird, co-founder of Ratehub.ca and president of CanWise Financial. “We expect that the Bank will not move the overnight rate until the effects of the declining energy sector are known. However, the Bank makes it clear that they still plan on raising the key interest rate in 2019, likely more than once.”
Alberta, saddled with a glut of oil, is bracing for dark, stormy clouds ahead, and hiked interest rates might be the least of their problems.
“I’m not so sure that one interest rate hike is that significant of an event,” said Croft Axsen, owner of Dominion Lending Centres Jencor Mortgage Corporation in Calgary. “More significant of a problem for us is that we don’t have 100,000 oil workers working because we don’t have a government supporting infrastructure building of oil to tidewater.”
With Justin Trudeau as Prime Minister, the Canadian economy has, by and large, been healthy, even vibrant, but Axsen’s assertion that his government has neglected Western Canada is perhaps not without merit.
“It might be time to think of supporting the country and the West, the Prairies, by getting some infrastructure built for pipelines to Burnaby or to the East Coast,” he said. “There are so many opportunities. I don’t get Central Canada’s thinking that getting its oil from Saudi Arabia is a good idea. The lack of leadership from our government in solving these problems is disappointing.”