Bank of Canada Rate | Page 12 | General financial discussion | Discussion forum

"Jeff Rubin first caught the attention of financial markets in 1989 with his now-famous call for a 25 per cent decline in Toronto real estate prices."

We bought our Toronto house in 1983 for slighty north of $100,000. Our next door neighbour recently sold their smaller house for a bit north of $1.7mm. How much longer will the gain on the sale of a principal residence be tax-free?

North of $1mm houses are now the norm in Toronto.

COIN said

I remember 1987.
"The 1987 market crash, known as Black Monday, occurred on October 19, 1987, when global stock markets plummeted, with the Dow Jones Industrial Average losing 22.6% in a single day."  

Yes 5 months before we bought the new house. House values dropped in late 87 early 88 but rebounded but unfortunately dropped again late 93 when we were selling to transfer from Toronto to Kingston ...

So, good timing House 1 to House 2 in 87, less good House 2 to House 3 in 93. TBD House 3 to below grass line, but I won't care!

There's going to be a lot of chatter over the next week (and has already been going on) about how the Fed NEEDs to be dropping rates because of this or that (choose whatever your preferred narrative is) BUT the fact is that the market had already been determined and baked in a drop all the way back on Aug 12.

So you can be guaranteed 100% that the Fed WILL drop the rate at least 0.25% next week. In fact, the market has pushed things down so that the Fed may need to drop the rate 0.50%, but it is too close to call on that one yet. But anything can happen within a week.

And, as of yesterday, the CDN market has moved down so that the BoC will HAVE TO lower the rate by 0.25% IF the market holds until next week.

Norman1 said
Bond yields are dropping because the bond markets are expecting central banks to cut rates in response to recent slowing inflation and worsening unemployment.

You can stop writing those lies about central banks having to change rates because of the bond market.  

That member has persisted with that view for a very long time which has gotten very old and tiring. I think the real facts are the central bank does not have a proprietary lock on all the economic and market data and thus directionally, bond market and central bank sentiment really shouldn't vary much and thus there should not be many surprises. IOW, it is mostly a matter of coincidences that gets mistaken for 'influence'.

At the same time, the central bank may have other reasons to change or not change and financial institutions don't really change any of their various deposit and lending rates until there is actual action by the central bank. As an example, the better one year GIC rates at brokerages have remained approximately constant @3.37% for some time and remain so today despite market sentiment of an upcoming decrease.

savemoresaveoften said

smayer97 said
the Fed may need to drop the rate 0.50%, but it is too close to call on that one yet. But anything can happen within a week.

What do you mean by "may need to" ? Given Fed does 100% what the market tell them to do (per you), shouldn't it be 100% certainty of a 25 or 50bps, not a "may"....  

Last I read, the market bet was 90% for 25bps and 10% for 50bps. So that 10% must be the "may" part of @smayer97 post. I guess market will have to wait to see what the Fed decides, which should be interesting given how politicized it's become.

JohnnyCash said

Last I read, the market bet was 90% for 25bps and 10% for 50bps. So that 10% must be the "may" part of @smayer97 post. I guess market will have to wait to see what the Fed decides, which should be interesting given how politicized it's become.  

I never needed to look at market "bet" statements. The Fed will 100% decrease rates by at least 25bps. If the market rate falls below 4%, the Fed will drop by 50bps. Unless the 3-mon Bond mkt is below 4%, the Feb will 100% not move more than 25bps.st

IOW, want to know where the CBs are going next, just watch the mkt.

Dean said
.
Wait for it ... tomorrow (Sept. 17th) will tell❗

Dean

Fast forward to Sept. 17th (Today) . . .

No Surprise Here ... https://financialpost.com/news/economy/bank-of-canada-cuts-interest-rates-official-statement-september-17?itm_source=index

.
Dean

As stated, no surprise. 25bps drop by both Fed and BoC., all easily trackable, and visible well in advance, without looking at the headlines or listening to the justifications. The nice thing is that it is with confidence you can see not only when the CBs will change rates, but also by how much.

Though the US mkt dropped and is still just below 4%, it has only been 2 days, and yesterday there was a spike to nearly 4.15, so no wonder the Fed did not meet the market by dropping 50bps. But now, the Fed is poised for at least another 25bps for the next meeting.

smayer97 said
As stated, no surprise. 25bps drop by both Fed and BoC., all easily trackable, and visible well in advance, without looking at the headlines or listening to the justifications. The nice thing is that it is with confidence you can see not only when the CBs will change rates, but also by how much.

There is no surprise cuz CB signal to the market past few weeks that 25bps is what the CB is most likely going to do. So the market listens and start adjusting the rate to reflect. Same as Powell told the market he was not ready to cut rates 6 months ago and the market hence does not price in any cuts.
CB the leader, market the follower. Always has, always will. Maybe Trump will change all that...

It's getting interesting.

Inflation has been stable for almost a year now, and certainly hasn’t dropped in the last few months (see the plot):
https://www.theglobeandmail.com/business/article-bank-of-canada-rate-announcement-september-17/

The economy is obviously sucking, and falling US rates leave little choice to BoC, but it's also clear that there is upward pressure supporting the prices in recessionary environment. Dropping the rate as the government stimulates the economy with $13bn funds and pet projects could reignite inflation.

Could go either way but 3 to 6 months forecasts are becoming more challenging.