Oil’s Decline Not Ideal for Canada

The plunge in oil prices is “on the whole” a negative for Canada’s economy and may delay its return to full potential, Bank of Canada Deputy Governor Tim Lane said.  “We will closely monitor its broader impacts on growth and the delay it may cause to the economy’s return to its production potential,” Lane said in a speech today in Madison, Wisconsin.

Economists are interpreting his remarks as confirmation the central bank will hold off raising interest rates for the time being. Governor Stephen Poloz and fellow members of the bank’s governing council will publish their next rate decision on Jan. 21, along with a quarterly policy report that will provide a detailed impact analysis of falling oil prices.

Lane’s remarks are “a fairly telling statement that we are going to stay lower for longer, unless oil prices come bouncing back,” said Doug Porter, chief economist at BMO Capital Markets in Toronto. Porter said he is close to moving his forecast for a rise in the 1 percent policy rate into 2016, from the fourth quarter of this year.

Bloomberg

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