The unexpected decision by the Bank of Canada on Tuesday to cut its key interest rate by a quarter point to 4.25 percent will probably do little to help exporters struggling to cope with a rising Canadian dollar, economists said.
In announcing the reduction, the Bank of Canada also reversed its previously optimistic outlook for the US economy, citing concerns about the subprime mortgage problems.
"Anticipated losses on US subprime mortgages have worsened since mid-October and are expected to persist for a longer period of time," the bank said in its announcement. "In these circumstances, bank funding costs have increased globally and in Canada, and credit conditions have tightened further."
Jayson Myers, chief economist of the trade group Canadian Manufacturers and Exporters said the rate cut was an indication that the nation's resource wealth did not provide an escape from the uncertainty in the US.
"The Canadian economy is not freewheeling," Myers said. "It's still very closely tied to the North American market."
Leading up to Tuesday's decision, the Bank of Canada was faced with conflicting situations. High oil and commodity prices have kept Canada's economy generally buoyant and arguably overheated in some regions, particularly energy-rich Alberta. But the rise of the Canadian dollar to parity and beyond with the US dollar has squeezed manufacturers in Ontario and Quebec, whose exports are often priced in US currency.
Although the bank appeared relatively unconcerned about the dollar's high level in its rate announcement, the currency did give it leeway for its interest rate cut. It said October's inflation rate of 2.4 percent was below its expectations, a factor it attributed to price cuts on imported merchandise.
After the announcement, the Canadian dollar fell to C$0.9878 from a close of C$0.9998 on Monday. While that is a large swing in currency market terms, it will not provide significant benefit to exporters. A year ago, the Canadian dollar traded at C$0.87.
"The rate cuts do not reverse things for our members," Myers said. "Their cash flow is under tremendous pressure because of the dollar, so it's difficult to get financing."
Douglas Porter, deputy chief economist of BMO Capital Markets, a unit of the Bank of Montreal, said he anticipated at least one more rate cut even though a second cut was unlikely to bring exporters the currency relief they want.
"Perhaps it will take some of the edge off the currency and reduce the chances it will go to C$1.10 soon," he said.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique