That’s not exactly what we have come to expect from the Bank of Canada.  For years it’s been none and done.  Historically when the Bank of Canada makes an adjustment to the overnight lending rate, up or down, it’s not normally a one shot proposition.  So why the change?  Well, for now there was no need to lower the overnight lending rate.  Financial and economic conditions have improved since the last rate cut.  Still somewhat tenuous but not as dire as some were suggesting.  Here’s how the Bank of Canada rationalized not making a change to the overnight lending rate, “The oil price shock has had a modest early impact on aggregate demand, and a larger effect on income.  The Bank continues to expect that most of the negative impact from lower oil process will appear in the first half of 2015, although it may be even more front-loaded than projected in January.  Nevertheless, data for 2014 as whole suggest the anticipated rotation into stronger growth in non-energy exports and investments”.

One doesn’t require expertise in breaking ciphers to decode the Bank of Canada’s position. Simply stated, there’s still concern about Alberta, relative to the price of oil, but the fallout and pain may be contained.  Also, there are always winners and losers when markets sectors fluctuate. So Alberta’s short term pain may be Ontario’s gain. Yes, it appears that the “have not” province may be in a position now to tuck away their tin cup and pencils – not for a moment do I think politicians at every level in Ontario will cease being the country’s most organized panhandlers, but the justification for handouts may become more difficult. Falling oil prices, and rate cut, all led to falling Canadian dollar; couple that with a surging U.S. economy makes the prospect of a buoyant export sector, critical to Ontario’s growth, all the more real.  Furthermore, a number of economists are suggesting that the Canadian dollar will settle in at 0.75 U.S.D. in 2015.  That’s a big “owie” if you’re traveling abroad for March break, but if your business depends on exports to the U.S., it might be time to pull out that Cuban cigar out of the humidor.  Time to celebrate, no need for process improvements or innovation, we can win on price.  That sounds vaguely familiar. 

 Ontario:

Irrespective of the positive outlook for Ontario, the reality is that the province is in a financial mess.  The debt load and mismanagement by the public sector is well documented. Of course it doesn’t matter in Ontario; another majority government for the ruling party demonstrates that.  So Ontario gets to lead again, in spite of the provinces leadership. But if you live in Ontario, you don’t care.  Residents of Ontario have been maligned and abused for many years now. A small sense of joy, and moments of boastfulness, should be expected. The reality is that the country needs Ontario to lead today to offset any negative impact as a result of the weakness in the resource sector. If you live in Ontario, it’s time to sharpen up those arrogant skills. Don’t worry, it will come back to you.  It’s like riding a bike.

Until next time,
Cheers.