BlackRock Says Canada Needs QE

Canada’s stagnating economy could force its central bank to deploy the type of extraordinary stimulus adopted in the U.S., Europe and Japan, according to BlackRock Inc., the world’s biggest money manager.

With a commodity prices collapse that probably sent the country into recession in the first half showing no signs of letting up, the Bank of Canada may need to follow its developed-nation peers with quantitative easing, according to Aubrey Basdeo, BlackRock’s head of Canadian fixed-income.

The Bank of Canada has already cut its benchmark interest rate twice this year to turn around the worst economic streak since the country’s last recession. With an overnight rate now at 0.5 percent, it’s nearing the point where other central banks decided to begin bond buying programs to force rates lower still and help companies borrow more cheaply.

“Corporations are screaming, ’I borrow out the curve, I don’t borrow in the overnight market, and my cost of funds have gone up even though you’re lowering rates,’” Basdeo said in an Aug. 10 phone interview from Toronto. “So you have to go into unconventional monetary policy.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza