Yesterday Canadian dollar reached its monthly minimum levels after the macroeconomic statistics were released by Canada’s National Statistics Agency. September 2007 retails sales fell by 0.2 percents compared to previous month. USD/CAD traded at 0.9923 on Forex as the data was released.
Given such a pessimistic background for the next Bank of Canada meeting, which will be held on 4 December, overnight interest rates might be cut by 25 basis points to give Canadian economy a little more breath room. Global liquidity instability combined with strengthening Canadian dollar are clear dangers to the growth of Canada’s
Another argument to support a rates cut is lower inflation — October core CPI was 1.8%, below 2%. Which means that lowering interest rates won’t boost inflation to the uncontrollable levels. Canadian marketable bonds yields for the last 2 weeks fell below 4% giving another sign of the possible rates cuts to happen soon.
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