These are stories Report on Business is following Wednesday, Sept. 3, 2014.
Bank of Canada steady
Don’t expect much in the way of anything new, or a shift, from the Bank of Canada today.
Which means the Canadian dollar shouldn’t react in any major way, either.
Observers expect Governor Stephen Poloz and his central bank colleagues to hold the line on their “neutral bias” in their policy statement later this morning, signalling again that the next move in their benchmark interest could be either up or down, with no timeline attached.
And they won’t tinker with the actual overnight rate, which now stands at 1 per cent.
While the central bank is stuck in neutral, economists don’t expect a rate cut, believing that the next move will be up, and that that will take place sometime next year.
The Bank of Canada will probably repeat that the factors driving inflation are temporary, and that there’s still plenty of slack in the economy, and thus it’s holding the line, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
Given everything that’s expected, the Canadian dollar, which has dipped 1.5 per cent since the central bank’s last meeting, shouldn’t move much from its current level of about 91.7 cents U.S. this morning, she added.
Many observers believe Mr. Poloz won’t do anything that would deliberately push the currency higher as he hopes for an export pick-up.
“We’ve highlighted one reason why the Bank of Canada has avoided conceding that a hike down the road is now much more probable than a cut: its reluctance to do anything that might send the Canadian dollar stronger,” said chief economist Avery Shenfeld of CIBC World Markets.
“To keep the currency on the defensive, it’s trying to remain more staunchly dovish than Janet Yellen,” he added, referring to the chair of the Federal Reserve.
“We share the view that a weaker loonie would support a needed transition to exports, but in terms of maintaining its credibility, would prefer the central bank to directly communicate that view rather than talk about a highly unlikely rate cut.”
What some other economists expect:
“The data since the July meeting have been generally better than expected. However, their strength is unlikely to have been sufficient to meaningfully change the BoC’s economic outlook. Moreover, in a recent interview, BoC Governor Poloz made it relatively clear that the BoC is no hurry to hike rates as there is still a lot of spare capacity in the economy and growth still needs support. Our base remains that the BoC will likely remain on hold until mid-2015 and we believe the probability of a rate cut has now virtually disappeared.” Charles St-Arnaud, Nomura Securities
“We look for little change in the announcement’s meaty parts discussing policy prospects. Look for that dull dovish light to continue being cast on policy prospects despite a repeat of the ‘neutral’ rap.” Michael Gregory, BMO Nesbitt Burns
“Beyond the second quarter, our expectation is that Q3 growth will strengthen further to 3.3 per cent that is considerably stronger than the central bank’s expectation of a moderation to 2.3 per cent. Confirmation of the strengthening in growth in upcoming data is expected to result in a tightening bias being re-introduced though such a shift is more likely coming out of either the Oct. 22 or Dec. 3 meetings rather than the Sept. 3 meeting.” Paul Ferley, Royal Bank of Canada
- Kevin Carmichael: Bank of Canada won't follow Fed's lead on interest rates, Poloz says
- Kevin Carmichael in ROB Insight (for subscribers); Poloz sets record straight on inflation target
Couche-Tard sells unit
Canadian convenience-store giant Alimentation Couche-Tard Inc. is selling the aviation fuel business it inherited in its acquisition of Norwegian oil giant Statoil ASA’s retail operations.
Laval, Que.-based Couche-Tard said today it struck a deal to sell its aviation fuel unit for an undisclosed sum to Air BP, one of the world’s largest aviation fuel providers, The Globe and Mail's Bertrand Marotte reports.
The agreement is through Couche-Tard’s wholly owned subsidiary Statoil Fuel & Retail AS, which it acquired in a blockbuster $3.6-billion (U.S.) deal in 2012.
Air BP will acquire 100 per cent of all issued and outstanding shares of Statoil Fuel & Retail Aviation AS.
SFR Aviation supplies aviation fuel products to airlines, general aviation, military and bulk customers in nine countries across Northern Europe.
Streetwise (for subscribers)
ROB Insight (for subscribers)