THE BANK OF CANADA IS READY TO NEGATIVE INTEREST RATES

Recently Stephen Poloz said that THE BANK OF CANADA IS READY TO NEGATIVE INTEREST RATES Canadian central bank expands its emergency kit to defend the economy against major shocks - it can use lower interest rates in the event of a crisis. But Governor stressed that it does not mean the bank is preparing to use any of these measures (although the collapse in the price of oil and other commodities). “We don’t need unconventional policies now, and we don’t expect to use them. However, it’s prudent to be prepared for every eventuality,” Governor Poloz said yesterday.

If the crisis begins, the Bank could implement unconventional monetary policy measures: for example, stimulating the economy through quantitative easing or moving its policy rate below zero. Furthermore, the Bank would use whatever combination of these measures it judged appropriate under the circumstances. “Regardless of the situation, the Bank will keep its primary focus on achieving the inflation target,” Governor Poloz said.

And all this is taking place just days before the Federal Reserve looks likely to raise its key interest rate next week for the first time since the Great Recession. Most of the world’s central banks, including Canada’s, have been cutting rates. A Fed hike will mark a major divergence in global interest rates that is already sending tremors through the world’s stock, bond, commodity and currency markets. Canadian dollar fell to 1.3623 against US dollar yesterday, but now USD/CAD trades near 1.359.

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LOONIE, CANADIAN BOND RISE AS LIBERAL PARTY LEADER WINS FEDERAL ELECTION

The Canadian dollar strengthened Tuesday after Canadians voted for Liberal Party leader Justin Trudeau as the country’s new prime minister in the federal election.

The nation-wide vote, held on Monday, led to the ouster of Stephen Harper, who was running for what would have been his fourth term as prime minister.

Justin Trudeau will now become Canada’s 23rd prime minister. The Liberal party, which claimed 184 seats in the newly expanded 338-seat House of Commons, became the first ever to vault directly from third party status to government, says National Post.

The country’s new leader campaigned on a plan that included running C$25 billion in deficits over three years to stimulate the economy with infrastructure spending, while increasing taxes on top earners and cutting them for the middle class, says Bloomberg.

The Canadian dollar strengthened by 0.34% to 77.06 U.S. cents, paring a decline from Monday’s session. It traded at 76.79 late Monday in New York.

The yield on the Canadian 10-year sovereign bond rose 6.1 basis points to 1.52%, according to FactSet data.

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