March 6, 2024 - Bank of Canada holds key rate steady at 5% | Page 2 | General financial discussion | Discussion forum

smayer97 said
Again, NOTHING to do with controlling inflation, nothing to do with political pressures. ANYONE can see the TRUE and ONLY influencing factor.... don't be fooled.

Once I checked this out and proved it to myself, I no longer fall for all these talking points.  

I've noticed that the US 3 month t-bill seems to pull the fed rate along for the ride, as this graph illustrates. Focus only on the blue (fed rate) and the green (3 month t-bill).

AltaRed said
Still, only about 0.18% of mortgages are in arrears, which is up about 35% from 0.13% a year or two ago. https://financialpost.com/news/mortgage-delinquency-rates-ontario-british-columbia-soar Canada can't quite help it if 'regional' Ontarians and 'regional' British Columbians threw caution to the wind and became reckless.
…

Ontarians and British Columbians are doing fine as well.

Canadian Bankers Association statistics show the same 0.18% delinquency rate Canada wide. Ontario is up to 0.12% (from 0.07% in December 2022) and BC is up to 0.14% (from 0.11% in December 2022).

Looks like fake drama. Just as my drinking would be if it was up 100% from one drink per week to two per week.

Norman1 said

AltaRed said
Still, only about 0.18% of mortgages are in arrears, which is up about 35% from 0.13% a year or two ago. https://financialpost.com/news/mortgage-delinquency-rates-ontario-british-columbia-soar Canada can't quite help it if 'regional' Ontarians and 'regional' British Columbians threw caution to the wind and became reckless.
…

Ontarians and British Columbians are doing fine as well.

Canadian Bankers Association statistics show the same 0.18% delinquency rate Canada wide. Ontario is up to 0.12% (from 0.07% in December 2022) and BC is up to 0.14% (from 0.11% in December 2022).

Looks like fake drama. Just as my drinking would be if it was up 100% from one drink per week to two per week.  

Not the expert so cant say if 0.12% is a big number or manageable, or 0.07% is or is not a non event either.

If one drink per week is the max it should be, then up it to 2 drinks can have dire consequences, not just your wallet lol

Alexandre said

Alexandre said
I haven't expected BoC to keep key rate where it is. I thought BoC will cave to political pressure and start lowering rates.

Level of mental gymnastics to convince BoC cut rates is truly astonishing:

Jim Thorne, the chief market strategist at Wellington-Altus Private Wealth, said in an interview with BNN Bloomberg on Wednesday that policy is now driving inflationary pressures.
“...There is a unique time, a very nuanced time where rate hikes cause inflation and therefore rate cuts cause disinflation. And the Bank of Canada should be cutting rates to bring inflation down.”

Cut rates to increase borrowing, which will bring inflation down!

Enjoy full article here: https://www.bnnbloomberg.ca/chief-market-strategist-says-boc-should-cut-amid-policy-induced-inflation-1.2044037  

The industry puppets abound. But this one is truly priceless, I agree.

smayer97 said
CBs will NEVER cut rates UNLESS the short-term bond market responds by causing a lowering of those rates. The CB ALWAYS follows bond market rate changes, ALWAYS trying to stay within 0.25% of the bond market, i.e. reacting to, and NEVER leading.

In other words, the CB does NOT act independently of the bond market. No amount of postulation or any other mental gymnastics will change that.  

At least 2 or 3 times in the past what u said above has already been proven WRONG.

savemoresaveoften said

At least 2 or 3 times in the past what u said above has already been proven WRONG.  

I would love to be enlightened... no tongue in cheek, really, and not just for me but for anyone else reading. I'm all about being educated.

smayer97 said

I would love to be enlightened... no tongue in cheek, really, and not just for me but for anyone else reading. I'm all about being educated.  

October 1998 - Russian financial crisis, Asian economic crisis, & collapse of the hedge fund LTCM

The FOMC made a surprise interest rate cut of 0.25%, from 5.25% to 5.00%. It lowered it again to 4.75% on November 17, 1998, before raising in 1999 and 2000 to a peak of 6.5%.
2001 - Tech Bubble Burst & 9/11

On January 3, 2001, the Fed announced a surprise interest rate cut by 0.50% to 6%.

The FOMC announced an emergency rate cut on September 17, 2001, by 0.50%, from 3.50% to 3.00% to provide liquidity to markets after the terrorist attacks.

January 22, 2008 – Recession risks mount as stocks crash so the FOMC cut rates by 0.75%, from 4.25% to 3.50%.
January 30, 2008 – The FOMC cut rates another 0.50% to 3.00%.

Dont remember exactly but its either the Jan 22 or Jan 30 was the most shocking cuz one of those is just days before a FOMC meeting. Markets expect FOMC to wait till the meeting but FOMC went ahead and surprised every one.

Every surprise rate cut the bond market scrambled to react, and certainly not CB follow bond traders. Traders make way more money than central bankers, but central banks have the power that traders dont.

https://www.onebridgewealth.com/content/Abriefmodernhistoryofsurprisefedannouncements.
A good article to read that summarize major rate events in the last 20 years.

My two cents worth, and yes, that's all it's likely worth...I'm as far from an expert on monetary policy as you will find.

I think that Smayer97 is correct in suggesting that CB rates appear to follow 3-month and 6-month t-bill rates. The graphs are very clear on this. He's right that you can't argue with this when it's so clearly illustrated in any number of graphs.

But it seems likely that both short term t-bill rates and the CB rate both fluctuate on the basis of some of the same important factors, namely state of the economy and inflation. But t-bill rates are free to float and fluctuate on a daily basis, responding in almost real time to changing conditions. CB rates are not free to do this. CB rates are only adjusted at pre-determined intervals, and thus changes do not reflect responses to new information in real time -- instead, they are lagging.

So as Smayer97 points out, short term t-bill rates can be used as a predictor of lagging CB rates (and there are plenty of references to this predictive power online). From there, it might be easy to assume that the rapidly-changing t-bill rates are somehow influencing the CB rate. Seems pretty clear that you shouldn't make this jump in reasoning. And to be fair, I don't think Smayer97 is saying this. He's only saying that, if you want know where the CB rate is going, 3-month and 6-month t-bill rates give some pretty clear clues.

lifeonanisland said
So as Smayer97 points out, short term t-bill rates can be used as a predictor of lagging CB rates (and there are plenty of references to this predictive power online). From there, it might be easy to assume that the rapidly-changing t-bill rates are somehow influencing the CB rate. Seems pretty clear that you shouldn't make this jump in reasoning. And to be fair, I don't think Smayer97 is saying this. He's only saying that, if you want know where the CB rate is going, 3-month and 6-month t-bill rates give some pretty clear clues.

On multiple occasions and on different threads, Smayer97 is loud and clear that bond markets AlWAYS ‘dictate’ CB’s overnite rate and CB just follow, essentially bond traders set the monetary policy and not CB. That is just 100% wrong, 100% of the time.

And why do one needs to use t bill rates to give u clues ? The CB gives u clues at every meeting statement. That is the FIRST clue that is given, and the T-bill traders use that clue to adjust rates, and then CB adjust the rate at the next meeting. The reason for the whole process is such that there is little to no surprises most of the time. But its the CB that gives the first clue, not the bond traders as Smayer97 keeps believing in....

BlueSky said
Canada's economy is not performing as well, to justify a rate reduction anytime soon. Governments will continue making buzz about lowering rates, to give hope to many struggling Canadians. So, holding rates at 5% is likely to continue for a little while longer, despite politicians desire. The Canadian economy is at the bottom in the G7. Inflation is not tamed just yet, compounded carbon taxes are continuing to cost more to all, the lack of affordable housing and shortage of housing will continue to cause rising costs, corporations are cutting staff. Under these conditions, it's hard to see interest rates going down. Most banks bet on a longer term recovery, so their best rates now are within 1-1.5 year terms.  

+1 to this. BlueSky's post is the smartest of this thread, and I agree with it. The Canadian economy is not as rosey as the U.S., and the BoC does not have the same luxury as the U.S. Federal Reserve in terms of not cutting rates multiple times this year. Whereas I think the Fed could easily hold rates where they are for all of 2024 and not bat an eye, the BoC does not have that same luxury and will either need to (a) cut rates by 100-150 bps more gradually over the course of the year or (b) do so abruptly in the back half of the year. Looks like they're opting for the latter, and I'm not sure why. Only thing I can think of is they want to try and maintain a stronger Canadian dollar...

Cheers,
Doug