These are stories Report on Business is following Wednesday, March 4, 2015.
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Will he or won't he? Probably not today
Stephen Poloz has put the guesswork back into central banking.
Not that he's moving against the grain, as central banks around the world are slashing their key interest rates. But no one saw January's surprise cut coming.
Which brings us to today. And that guesswork.
Up until a week ago, many observers expected that the Bank of Canada governor would follow up the January cut with another one this morning.
But – surprise! – Mr. Poloz turned that tide when he suggested last week that the January move was "appropriate" under the circumstances.
Many observers now believe that Mr. Poloz and his colleagues will hold their benchmark overnight rate steady at 0.75 per cent today, and will wait to see how things play out, notably the impact of the crash in oil prices.
So a rate cut down the road is still "on the table," said senior economist Benjamin Reitzes of BMO Nesbitt Burns, adding that Mr. Poloz could well trim by another quarter of a percentage point "if the data turn sour."
Yesterday's report from Statistics Canada, for example, showed the economy chugging along at a decent annual pace of 2.4 per cent in the fourth quarter of last year.
But that didn't real show the impact of the oil slump, and economists expect Canada's numbers to weaken this year.
Which makes it all data-dependent, and another rate cut quite possible at some point.
"The 25-basis-point insurance cut put in place in January buys enough time at this stage," said assistant chief economist Sébastien Lavoie of Laurentian Bank, who expects Mr. Poloz to hold tight this morning.
"The odds are still in favour of a 25-basis-point cut in mid-April, late May or mid-July," he added.
"For these meetings, BoC officials will have more details about the impact of the oil shock on the Canadian economy, as well as additional information regarding oil producers (in Canada, U.S. and the OPEC)."
Mr. Poloz's words and actions, of course, have moved the Canadian dollar this way and that.
"BoC policy has been a very live issue for markets so far in 2015, beginning with the surprise rate cut in January and again when Governor Poloz quashed expectations that another cut is imminent in a speech last week," said senior currency strategist Greg Moore of RBC Dominion Securities.
"That means this week's BoC meeting on Wednesday is front of mind for investors and the obvious focus for CAD's direction," he added, referring to the currency by its symbol.
Senior foreign exchange strategist Sébastien Galy of Société Générale, for one, believes the loonie may be nearing bottom.
"A BoC rate cut is possible ... but widely unexpected," the senior foreign exchange strategist said.
"Nonetheless, even with this possibility of a surprise from the BoC, we are getting close to the turn around in CAD vs. USD," he added.
"It is now cheap on all metrics and the potential for a widening of rate differential expectations is close to peaking."
Two members of the C.D. Howe Institute's monetary policy council, by the way, recommend that the Bank of Canada cut today, while two others propose an increase.
The remaining economists on the council, which makes recommendations in advance of central bank meetings, want it to stay where it is.
Then there's the guesswork aspect, given that the central bank gave no signal last time out.
"Some members observed that sensitivity to all statements by bank officials had increased enormously since the cut, and felt that the bank needed more clarity, not only to improve understanding of the outlook for the policy rate, but on larger issues, such as potential changes to the inflation target," the group said.
There's no question that the cut surprised the markets, and this group believes that the central bank must now "respond to the uncertainty" it sparked.
"One view was that, if the bank felt that the lower price of oil created serious downside risks for the Canadian economy, it should cut the target again to ensure that monetary policy created significant offsetting support to spending and output," it said.
"Some others thought that the cut had been a mistake, but differed about whether the bank should effectively admit as much by raising the rate again, or holding the rate at 0.75 to avoid further unsettling markets, and raising it over time."
- David Parkinson in ROB Insight (for subscribers): Poloz may be standing firm on rates, but will that last?
- Scott Barlow in ROB Insight (for subscribers): The loonie, the Fed and the chart to watch
- Barrie McKenna and David Parkinson: Poloz says January rate cut was the 'appropriate amount'
- Luke Kawa's Inside the Market (for subscribers): Global bank takes bleak view on Canada, sees 69-cent loonie
- The dark side of a weak loonie: Prices for food, clothes, books shoot up
Torstar flat
All the romance is gone from Torstar.
The Canadian media company today posted a flat fourth-quarter profit of $20.6-million or 26 cents a share, The Globe and Mail's James Bradshaw reports.
For the year, profit climbed to $172.7-million, or $2.16, from a loss a year earlier.
But the 2014 results include the gain from the sale of Harlequin.
That sale closed last summer, meaning a pretax gain of almost $225-million.
The quarterly results are anything but steamy, though chief executive officer David Holland pointed to 2014 as "a very significant year" given the decision to sell the romance book publisher.
- Make Me Melt: The sale of Torstar's Harlequin as a bodice-ripper
- James Bradshaw: Torstar profit flat as revenue takes hit from lower print ad sales
RBI cuts rates
India's central bank is getting in on the surprise rate-cutting bandwagon. Again.
The Reserve Bank of India today cut its benchmark rate, for the second time since the start of the year.
Down by a further one-quarter of a percentage point, the key rate now stands at 7.5 per cent.
"Softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half," said central bank chief Raghuram Rajan.
"The fiscal consolidation program, while delayed, may compensate in quality, especially if state governments are co-operative."
He was referring to Prime Minister Narendra Modi's budget late last month, which, as Kevin Carmichael reports, laid out a measured economic reform agenda.
The central bank chief also said he will target a 4-per-cent inflation rate within a few years.
Today's rate cut comes about a month ahead of the central bank's next meeting in early April.
"It came as a surprise because the recently presented budget gave no indication of the government either adhering to its fiscal consolidation objective for the next year or of working towards improving the quality of the deficit – save for its stated intent," said Kunar Kumar Kundu of Société Générale.
- India's RBI surprises again with post-budget rate cut
- Kevin Carmichael: Modi's measured budget could transform India's economy
Toronto home sales, prices up
Resale homes are flying off the shelves in Toronto.
Sales in February climbed 11.3 per cent in February, to 6,338, from a year earlier, the Toronto Real Estate Board said today.
Active listings fell 8.7 per cent, which means "that market conditions became tighter, leading to more competition between buyers," the group added.
The average price rose 7.8 per cent to $596,163.
The average price of a detached house, by the way, is above $1-million, up almost 9 per cent from a year ago.
- Average cost of a detached Toronto home tops $1-million
- Brent Jang: Modest Vancouver home a seller's dream as bidding wars return
- Buying a Toronto home a 'stretch for many,' while Calgary costs sink
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