Entries in interest rates (2)


CCC: What does it mean for Canada when U.S. interest rates go up? 

By Hendrik Brakel, Senior Director Economic, Financial & Tax Policy, Canadian Chamber of Commerce

After seven long years with interest rates at zero, the U.S. Federal Reserve will almost certainly raise rates by 0.25% at its next meeting on December 15. It has been warning about a coming rate hike since 2013. In the last Fed statement, it changed the wording it has used for years about “In determining how long to maintain this target range...” to “In determining whether to raise the target range at the next meeting...” In the obscure language of Fedspeak, this is like waving your arms and hollering. The signal is intended to warn investors and avoid big market gyrations caused by a surprise. 

What does it mean for business? Rates will rise because the U.S. economy is doing so well that the Fed has little choice but to act. U.S. GDP growth should come in around 2.8% this year and 3.3% in 2016; unemployment is down to 5% and wages are picking up. Since there is usually a 12-18 month lag before a change in interest rates starts to impact the real economy, the Fed has to act now if it wants to stop inflation from overheating a year from now. 

A stronger U.S. economy is good for the global economy and it’s definitely good for Canadian business. Canada’s  manufactured exports are booming. Auto exports are up 14% this year; communications technology rose 13% and aerospace sales have soared a staggering 29%. This growth is expected to continue next year: Export Development Canada is forecasting a healthy 7% rise in Canadian exports in 2016. 

For the Canadian dollar, the Fed’s move means more downward pressure. Investors expect rate hikes to continue in the U.S. in 2016. This is in stark contrast to Canada, which has only just emerged from recession. Canadian inflation is low; consumers aren’t spending and our real estate market is showing worrying signs of overvaluation. There is no need to raise rates any time soon. 

The Canadian Chamber is expecting the loonie to head lower next year, averaging 73 cents in 2016. Good news for many exporters, but bad news if you’re planning a trip to the U.S.

You can find the full article 5 Minutes for Business: U.S. Interest Rates about to Rise: What Does It Mean for Canada? at chamber.ca


What business needs to know about the Canadian economy

On Friday, March 27th, the Peterborough Chamber of Commerce held its 126th Annual General Meeting with about 45 members at the Holiday Inn Peterborough Waterfront.   Along with approving the actions of the Board of Directors and financial statements for 2014, the attendees heard from Canadian Chamber of Commerce (CCC) Senior Director of Economic, Financial & Tax Policy Hendrik Brakel.  

Brakel broke down the current state of the Canadian economy from the impact of the US economic recovery to oil to Canadian household debt. 

“Business investment and exports are how the Canadian economy will grow in the near future,” he told the crowd.  “Ontario will be leading the way on both of those fronts for Canada.” 

Oil prices will rebound, Canadian interest rates will remain low and we will see emerging markets slowing their growth compared to recent trends.  One word of caution from Brakel was that the Canadian consumer needs to take a break and start paying down debt. 

Brakel also spoke about the upcoming federal election and on which issues the CCC will be focusing.  

"Identifying the needs of businesses across the country is the first step," says Brakel.  "We know what businesses need to be effective: people, capital, technology and innovation, access to markets and an efficient regulatory environment."

From that the issues flow. The Temporary Foreign Worker file has been a struggle for certain industries since the new rules came into effect last June.  There will be a push for a better approach to environmental regulations and ways to manage our natural resources, along with addressing the skills gap in the labour market, improving access for Canadian goods in new markets and creating a climate for innovation and technology.