OTTAWA — The Bank of Canada is leaving its interest rate unchanged and says the timing of future hikes will depend on factors such as how long the oil-price slump lasts, how well business investment picks up its pace and how much room the economy still has left to grow.
The central bank’s move Wednesday maintains its trend-setting rate at 1.75 per cent. The decision follows the quarter-point increase at the bank’s previous policy meeting in October.
Thanks to the strengthened economy, the bank has been on a gradual rate-hiking path for more than a year and has already raised the benchmark five times since the summer of 2017.
The central bank raises the interest rate to prevent inflation from climbing too high. Heading into Wednesday’s announcement, many market watchers had expected governor Stephen Poloz to wait until at least January before his next rate increase.
More hikes are on the way, but the bank said the timing of its next one will hinge on changes in global trade policies as well as how higher interest rates from past increases affect consumption and housing.
The bank also underlined several recent economic developments that it will now take into account.
“The persistence of the oil-price shock, the evolution of business investment and the bank’s assessment of the economy’s capacity will also factor importantly into our decisions about the future stance of monetary policy,” the bank said Wednesday in a statement.
On oil, the central bank blamed the steep slide in prices on the combination of geopolitical developments, uncertainty about the outlook for global growth and the expansion of American shale oil production. The price of western Canadian oil, the bank added, has fallen further than other benchmarks because of transportation constraints that have led to production cuts.
“Activity in Canada’s energy sector will likely be materially weaker than expected,” the statement said.
Recent data, the bank noted, also show the economy has less momentum heading into the final quarter of 2018. It says it’s related to factors such as a drop in business investment that it largely connects to significant uncertainty around trade last summer.
The bank expects corporate investment to improve — outside the energy sector — following last week’s signing of the updated North American trade agreement, new federal tax incentives and ongoing pressure from rising demand.
It will also be watching for positive developments such as more signs the economy can still expand without stoking inflation. The bank pointed to recent downward revisions to gross domestic product data that suggested there’s still some space for non-inflationary growth.
The bank, which tries to keep inflation within its target band of one to three per cent, noted that October’s inflation reading of 2.4 per cent was above its ideal two per cent bull’s-eye. However, due to weaker gasoline prices, it is now predicting inflation to move down in the coming months by more than its previous forecast.
The Bank of Canada has estimated it will no longer need to increase the interest rate once it reaches a level of between 2.5 and 3.5 per cent, but Poloz has said this destination range remains “sufficiently uncertain” and could move up or down.
Andy Blatchford, The Canadian Press
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Insurance rate increases absolutely unacceptable: NDP Critic for Service Alberta
This post was submitted by Jon Carson, NDP MLA for Edmonton-West Henday, Opposition Critic for Service Alberta
Thirty per cent.
That’s how much auto insurance rates skyrocketed by for some Albertans at the end of this year, after Premier Jason Kenney and the UCP removed the five per cent cap on rate increases that our NDP government brought in, taking a “no limit” approach to how much insurance companies could actually raise rates.
The jump was immediate.
Albertans saw a wave of premium increases bordering on price gouging. Over 90% of car insurance companies filed for rate increases as soon as the cap was lifted, and rushed to bill drivers as soon as they could. Of the companies that received approved rate changes, the increases ranged from 4.9 per cent to an eye-popping 29.8 per cent.
It was a nice gift from Jason Kenney, who already slammed families for hundreds of dollars of new costs in his fall budget, including hikes to income tax, property tax, as well as more in school fees, prescription drugs and college tuition.
As usual, Finance Minister Travis Toews trotted out the UCP’s one-trick pony and blamed the NDP, claiming that insurance companies were set to pack their bags and flee the province if he didn’t let them jack up premiums beyond five per cent.
The lobbying effort came out in full force. The brokers, the insurance companies, and the Insurance Bureau of Canada are working overtime to sell quite the sob story: a massive spike in claims costs, not enough options for drivers, etc, etc. It’s tough times for the poor, little ol’ car insurance company.
What a load. These are some of the biggest and most profitable companies in Canada, and they simply want back the power they had to jack up premiums hand over fist.
The truth is that claims costs over the past few years are level, a fact that’s supported by the Insurance Bureau of Canada‘s own data. In fact, an actuarial analysis by Fair Alberta Injury Regulators, an organization made up of concerned Albertans, doctors and legal experts, found that injury payouts have stabilized in the last few years, and even started to dip in 2019. Their actuary specifically found evidence that claims are “not skyrocketing.”
This is further supported by the Alberta Superintendent of Insurance, responsible for all regulatory oversight of insurers operating in Alberta with a specific duty to ensure that insurance companies treat Albertans fairly. In his annual report for 2018, he found on average that the claims ratio for car insurance was 80 per cent across all companies in Alberta. Not the 120 per cent figure the insurance companies trot out on TV.
And while the UCP Government continues to claim they have documents to prove the cap made the car insurance industry unsustainable, they haven’t provided a single piece of paper showing any of these companies would bail if they could–GASP–only raise premiums five per cent every year.
So why remove the cap? Well, in politics, it’s who you know. And Jason Kenney knows an awful lot of people in the insurance industry. Namely, his former chief of staff and campaign director Nick Koolsbergen, who was hired to lobby the Premier on behalf of the car insurance industry just last year. He has Kenney’s cell phone number.
Sounds like a good guy to have on your side… if you’re a car insurance company.
The fact is, these companies turn a profit of tens of millions of dollars each year. They’re used to having carte blanche in Alberta, and they want it back.
Under the thinly-veiled guise of “red tape reduction”, the UCP has struck a panel looking at more regulatory changes that the insurance lobby itself has said “could also change the rate regulation framework that governs how insurers set premiums.”
If costs are going to go up even more, who will Jason Kenney look out for? His friends and interests in big insurance? Or everyday Albertans driving to work?
Knowing Jason Kenney, Albertans should brace for impact.
Jon Carson is the MLA for Edmonton-West Henday and the Alberta NDP Opposition Critic for Service Alberta.
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