Canada column for Sunday, Jan. 25/15
THE CANADIAN REPORT
(c) By Jim Fox
The rapid collapse of oil prices has prompted the Bank of Canada to cut its trendsetting interest rate to stabilize the economy.
“The drop in oil prices is unambiguously negative for the Canadian economy,” central bank governor Stephen Poloz said as the rate fell to 0.75 percent from one percent where it has been for four years.
As an oil-producing nation – selling more crude to the U.S. than any other country – the economic impact of cheap fuel threatens Canada’s economic rebound and a return to a balanced federal budget.
So far, Canada’s commercial banks have made no move to lower their prime-lending rate that is still three percent.
The rate cut immediately caused the Canadian dollar to fall by about three cents from a week ago to the 80-cent US range but it boosted stock markets.
The Conference Board of Canada predicted plummeting oil prices would cause a loss of $4.3 billion in the federal government’s current-year income and a loss of $10 billion in royalties and tax revenues for the provinces.
The federal government is also delaying its budget until April to assess the situation.