The value of the Canadian dollar has plunged to its lowest level in six years as the Bank of Canada cut its key interest rate to 0.50 percent to stimulate the economy.
While not calling the financial situation in Canada a recession, bank governor Stephen Poloz revised the outlook for the economy due to the impact of lower oil prices and slumping exports in the second quarter.
“I’m not going to engage in a debate about what we call this,” Poloz said. “There’s no doubt we have worked our way through a mild contraction.”
It’s the second time this year the central bank has cut its trend-setting rate aimed at giving consumers and businesses lower rates to spur spending and exports of Canadian products.
The 0.25 percent cut resulted in an immediate drop in the dollar’s value to below 77 cents U.S. on Friday – the lowest since the recession of 2009.
The lower outlook for economic growth is partly due to oil producers making big cutbacks in investment as prices have dropped.
With the U.S. economy “gathering more momentum” and lower interest rates, Canada’s economy should grow now through the end of the year, Poloz said.
Drought in Canada’s western provinces has led to numerous wildfires and emergency measures.
Forest fires in Saskatchewan forced 13,000 people from their homes in 50 communities in the past two weeks, destroying 80 houses and cabins.
There are 127 fires burning, half of them near La Ronge, in the north of the province.
Three counties in Alberta – Leduc, Mackenzie and Parkland – have declared an “agricultural crisis” with the driest year in half-a-century.
The highest alert level for a drought is in effect in British Columbia’s Lower Fraser and south coast areas as the province considers suspending water usage and licenses.
There are already fishing restrictions on about 100 rivers, mostly in southern Vancouver Island, the Kootenays and the Okanagan.
News in brief
▪ The leaders of Canada’s provinces and territories have reached an agreement for a national energy strategy to support project development and acting on climate change. The agreement at the premiers’ meeting in St. John’s came after several days of discussion about finding a balance between economic growth and environmental protection. The plan sets out a strategy to work on energy priorities collectively.
▪ Canada’s consumer price index rose by 1 percent last month compared with a year ago, with higher prices for food and shelter being offset by lower gasoline prices. Food cost 3.4 percent more, with meat up 6.6 percent, while gasoline prices were down 14.1 percent from last year, Statistics Canada said.
Facts and figures
Canada’s dollar has fallen to 76.99 cents U.S. while the U.S. dollar returns $1.2987 in Canadian funds, before bank exchange fees.
The Bank of Canada’s key interest rate was lowered to 0.50 percent from 0.75 percent while the lowest prime-lending rate is 2.7 percent.
Markets are mixed with the Toronto Stock Exchange index up at 14,623 points and the TSX Venture index down at 633 points.
The average price of gas is lower at a national average of $1.18 a liter or $4.48 (Canadian) for a U.S. gallon.
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▪ Four Cuban rowers have defected while taking part in the Pan American Games in Toronto. Coach Juan Carlos Reyes said the athletes have left the team and traveled to the United States. One of the four, Orlando Sotolongo, won a silver medal at the Games’ rowing venue in St. Catharines near the U.S.-Canada border. There were about 150 Cuban athletes in Canada.
▪ Saskatchewan and British Columbia are removing barriers to inter-provincial trade in wine and liquor. B.C. Premier Christy Clark says the two provinces are making it easier to order her province’s wine online and to buy specialty Saskatchewan spirits. British Columbia dropped trade barriers to wine from anywhere in the country a few years ago. She suggested trying Saskatchewan’s dill pickle vodka with clamato juice.
JIM FOX can be reached at email@example.com