Prime Rate - Stable
January 5 2016 Posted by Siemens Group
Yesterday, the US Federal Reserve finalized their bond buying program, QE3. They indicated that they will continue to buy bonds back that are up for maturity and that the prime rate will not be increased for a considerable time. Some analysts suggest this will occur the summer of 2015.
The Bank of Canada stated that lower gas prices are putting downward pressure on our inflation rate for 2015 than what was originally forecasted. While the Bank of Canada did not give a date to when prime may change they did state that Canada’s output would not reach full capacity until Mid 2016. I would suggest that we would not see a prime increase until this date.
The Bank of Canada also suggested that refrain from giving guidance as part of their rate announcements so that the market moves naturally vs. the addresses they give. This “hands off” approach is likely due to the market volatility created by the Federal Reserve’s addresses over the past year, which the stock and bond markets would hang on every word; creating huge swings in the bond and equity markets would take place on those days where Federal Reserve announcements were made. Stephen Poloz does not wish to have that same “power” over the markets. http://business.financialpost.com/2014/10/29/bank-of-canada-to-forgo-forward-guidance-and-let-markets-do-their-job