Quote:
Originally Posted by Innsertnamehere
The BoC has indicated that they aren’t too worried about diverging from the US fed on rates, to a certain extent.
CAD is likely going to be very low for a bit until the US catches up on lower rates.
BoC rarely makes one cut and leaves it. I suspect we’ll see 0.25 cuts quite frequently, if not every month, for the next little while. A 0.25 cut is ultimately quite small and not overly consequential. The BoC knows this.
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A low CAD will drive inflation higher due to import costs, so there's a hard limit on how much we can diverge from the US on interest rates.
If we make another 3-4 0.25% cuts and the US does nothing, the resulting drop in CAD will drive inflation higher to the point where can't make cuts anymore or possibly even a rate hike is justified.
IMO, we shouldn't be cutting rates at all. Inflation is still too high. IMO, we should actually lower the inflation target from 2% to 1% for the next few years to cancel out the above-target inflation in the early 2020s.
Besides, higher rates are a good thing. It pushes people & companies to reduce debt (which is unsustainably high), encourages saving, and reduces asset inflation.