· Dow recovered some of Fridays 400 point decline + 90.51 Around the world in
SHANGHAI, - Chinese stocks have plunged 7.7% following the central bank's latest credit-
tightening move.
· Dollar slipped further -.22c to $97.89
· Oil -4.10 to $134.35US per barrel the Group of Eight including Finance Ministers from
Canada will be looking for ways to stabilize runaway oil prices at their meeting in Japan
later this week.
· Gold $-.70US to $894.70US after jumping $23.80 on Friday,
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Bank of Canada to cut rates again
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June 10, 2008 Julian Beltrame The Canadian Press
Bank of Canada governor Mark Carney had an easy decision to make yesterday. Facing a stumbling economy and possibly the world's most dormant inflation picture, the rookie central banker will trim interest rates 25 basis points and hope for the best.
It's a no brainer, say most economists, with 12 out of 12 agreeing in one survey.
The central bank's continued easing stance will take its key overnight rate to 2.75 per cent which, combined with the U.S. Federal Reserve's hint that it is through cutting its equivalent rate for now, has put downward pressure on the Canadian loonie.
The dollar slid below 98 cents US yesterday to close at 97.89 cents.
But while today's action appears a foregone conclusion, Carney's job is about to get significantly more complicated going forward, say economists, because no one knows to any degree of certainty what will happen next to the U.S. and Canadian economies.
"There's uncertainty with respect to the prospects of the U.S. economy.
"There is uncertainty about how credit markets will evolve, then you have oil,'' said TD Bank deputy chief economist Craig Alexander.
"The forecasts for oil range anywhere from $70 to $150 by the end of this year and from a point of view of the Canadian economy, boy does this have significant impact in terms of national income, inflation and relative economic performance.''
The TD Bank is one of the few forecasting institutions that believes Carney will go to the sidelines only briefly after Tuesday, then begin cutting again in the fall.
That's because, says Alexander, he believes the Canadian economy will continue to struggle for the remainder of the year, and that next year's recovery will be weaker than most assume.
The economy had a surprisingly weak first quarter, with a 0.3 per cent contraction that was well below the central bank's prediction of a one per cent advance. And with Canadian inflation still running below the central bank's target of two per cent, nothing is holding back Carney from his third rate cut since taking over in February.
Previously, he has twice cut rates by 50 basis points at a time -- deviating from the bank's usual changes in 25-point increments.
"We're in a bit of a special situation compared to a lot of other central banks,'' said Stephen Malyon, a currency strategist with Scotia Capital, of Canada's non-existent inflation. "That won't last forever.''
What could restrain the Bank of Canada in the future is the fear of inflation returning. With prices rising at close to four per cent in the U.S., Federal Reserve chair Ben Bernanke has signalled he is through cutting for now, despite last week's employment report that showed the country losing another 49,000 net jobs.
