Indications are coming from Statistics Canada that as a result of a weaker-than-expected inflation backed by a drop in retail sales, there is a huge possibility that the Bank of Canada will issue a cut in the interest rate.
Even though the chances for a cut are high, the current economic status did nothing to help the situation even though the matter is being discussed by the central bank governing body.
Notwithstanding the fact that the interest rate cut is almost becoming a possibility, there is little else to be done as the economic status of Canada is also at a fragile state currently explained the Bank of Montreal chief economist Doug Porter.
He went on to elaborate that careful observation will be made on the coming months to evaluate the activities of exports and homes sales. These two areas are the most important factors presently.
As a result of an anticipated reduction in the real estate market and a decrease expectancy for exports, the Bank of Canada in its financial report this week lowered its financial expectancy.
The reduction in bank rates is expected to boost financial development up to 1.1% for this year which was supposed to be 1.3% in July. A reduction in estimates was also made for 2017 to 2% in comparison to the first proposed 2.2%.
But perhaps the situation is not that bad as it was reported that there was an increase in the consumer price index which stood at 1.3% in September which was higher than that of the previous year.
However economist were banking on a 1.5% inflation increase in September but the mild rate of the inflation gives the bank the opportunity to reduce on the rates if the economy continue to dwindle further.
CIBC economist Nick Exarhos explained that “the Bank of Canada arrived at a peaceful conclusion this week, but investors still have reason to remain alert on the Canadian expectancy.”
There was a 0.1% increase in food prices which is the lowest rate since February 2000. But the drop in food prices stores began its drop since 2008 at 0.9%.
According to Porter food prices made headlines during the course of the year. “We had great cauliflower problems in the first few months of the year, and presently we are battling with vegetable prices which have dropped and the overall grocery prices had dropped significantly in comparison to the previous year.
But the food sector is not the only sector that is going through hard times, the motor vehicles and parts dealer also went through massive drop as there was slow sales at new car dealers and used car dealers. The overall merchandise sector reported a 0.9% drop.