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Rate Cuts Coming January 20, Say Economists

Bad news for the economy is usually good news for interest rates.  That’s what they say.
Well, if that’s true then get ready for some low rates.  Here’s a dose of doomageddon to back it up:
  • Consumer confidence is at levels not seen since the 81-82 recession.
  • Canada’s jobless rate is at a 3-year high (CTV)
  • “We regrettably are going to have to expect continuing job losses in Canada. We are going to have substantial job losses.” – Finance Minister Jim Flaherty
  • December was the worst month of U.S. job losses since World War II
  • The U.S. “will see the first negative reading on the U.S. consumer price index since 1955…” — CIBC World Markets economist Avery Shenfeld.
  • Barack Obama:  “If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity. . . . In short, a bad situation could become dramatically worse.”
Bank of Canada Deputy Governor Pierre Duguay says the BoC is considering another interest-rate cut to counteract this negativism.  Economists concur.
  • According to CTV, analysts say the unexpectedly high jobless figures “will almost certainly mean that the Bank of Canada will cut interest rates on Jan. 20.”
  • Rates may fall 1% by later this year according to economists from CIBC World Markets and Bank of Nova Scotia. (Bloomberg)
  • TD economist Charmaine Buskas expects a potential 1/2% cut January 20
  • Royal Bank’s chief economist Craig Wright sees a 1/2% cut as well, but also a “bottom” at that level. (Bloomberg)
The Bank of Canada’s next interest rate meeting is now ten days away.  Its key lending rate is currently at 1.5%, a 50-year low.