December 5, 2008 / 7:04 PM / 12 years ago

UPDATE 1-Bank of Canada to cut rate 50 points -dealer poll

 * Rate cut to follow slew of easing by banks overseas
 * All but one dealer expects further rate cut in January
 (Adds comments and revised forecast)
 By Frank Pingue
 TORONTO, Dec 5 (Reuters) - Canada's primary securities
dealers unanimously predicted on Friday that the Bank of Canada
will cut interest rates by at least 50 basis points next week
as a slew of global central banks respond to a weak economy.
 Interest rate cuts by a number of overseas banks hoping to
stimulate their economies, weak domestic economic data, and
political turmoil in Canada should all convince Bank of Canada
Governor Mark Carney to announce at least a half-point rate cut
next week, the dealers said.
 "When Governor Carney has a look across the horizon of all
the central banks it's hard not to think he's not influenced by
the concerns expressed by these massive slashes to overnight
rates," said Stewart Hall, market strategist at HSBC Canada.
 Eleven of Canada's 12 dealers, surveyed by Reuters,
forecast Canada's central bank would cut its key overnight rate
by 50 basis points to 1.75 percent on Dec. 9. One dealer said
the cut would be 75 points.
 The bank has lowered its key overnight rate by 225 basis
points since December. It is now at 2.25 percent.
 Just this week, the European Central Bank cut its interest
rate by a record 75 basis points to 2.50 percent and the Bank
of England cut 100 basis points to 2.00 percent. Those cuts
followed Sweden's record 175 basis point cut to 2.00 percent
and New Zealand's 150 basis point reduction to 5 percent.
 Recent Canadian economic data, notably weak jobs figures
released on Friday, all point to a slowing economy and support
predictions that Canada will fall into a recession in early
2009.
 The decision this week to suspend Canada's Parliament until
Jan. 26 amid opposition attempts to bring down the Conservative
government is not widely expected to push the bank into making
a bigger rate cut than it feels necessary.
 "I just sense they are viewing their role as being quite
independent from the fiscal authorities," said Eric Lascelles,
chief economics and rates strategist at TD Securities.
 "Ultimately the two together do work but there is so much
uncertainty on the fiscal front that we don't know whether
there will be stimulus and we don't know when it will come."
 Six dealers said the central bank will cut rates by 50
basis points at its subsequent policy announcement date on Jan.
20. Five said the bank will lower the rate by 25 basis points
and one dealer expects no move.
 For the bank's March 3 policy announcement, six of the 12
dealers expect the Bank of Canada to leave its key rate steady
and six expect a cut of 25 basis points.
 The poll was taken after economic data showed the Canadian
economy shed more jobs in November than in any one month since
June 1982. Canadian employers cut 70,600 jobs in November, more
than the market's forecast for a drop of 25,000.
 (Editing by Peter Galloway)


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