Canadian Key Rate Untouched

Unemployment in the United Kingdom continues to decline according to the latest data reported by the Office for National Statistics. For the month of November, unemployment dropped to 5.10% from October’s 5.20%, marking the fifth consecutive decline in the rate and the lowest jobless level since 2005. Wages, including bonuses, continued to experience decelerating growth, exhibiting slowing expansion over the same period at 2.00%, missing estimates of 2.10% and previous month’s 2.40% reading. Wages excluding bonuses rose to 1.90%, beating expectations of 1.80% but below the prior figure of 2.00%. Bank of England Governor Mark Carney stated that in order for the Central Bank to raise rates, policymakers need to see a pickup in wage growth above 3.00% a year. The Governor elaborated on the point, saying that recent figures indicate remaining slack in the labor sector. Following the announcement, EURGBP fell sharply, dropping to 0.7700.

The Bank of Canada opted to keep rates unchanged at 0.50%, meeting consensus expectations. Central Bank officials reported their decision as concerns climb about the country’s economy considering still tumbling commodity prices. While some market participants were anticipating a rate cut, the Central Bank was unmoved in its stance owing to inflation heading towards the ideal target of 2.00%. However, despite inflation trending towards the goal, the BoC has lowered its growth forecast for 2016 and 2017 to 1.50% and 2.50% respectively. Central Bank Governor Stephen Poloz reiterated the importance of oil prices dropping and the persistent weight on the country’s economy. As the Canadian dollar weakens pressuring inflation higher, other resources will blossom according to Poloz. The idea of cutting rates was on the table as the economy appeared to stall at the final quarter of 2015, but the Government’s stimulus package and rising inflation, reduced the necessity to act.