Oh Canada! Canada Considers Negative Rates To Combat Economic (Oil) Slump

Canada’s central bank is considering a rate cut to combat an economic slump caused by low crude oil prices.

Canada’s GDP YoY has slipped into negative territory as crude oil prices drop. They are now waiting for the other shoe to drop.

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What to do about it? Call in the Central Bank!\

Currently, Canada’s overnight target rate (0.50%) is the same as The Fed Funds Target Rate (upper-bound).

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But maybe not for long.

The implied probability of a rate hike tomorrow is a coin flip. But the interesting tidbit is the positive probability of a rate decline to -0.25% in the latter half of the year.

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The expected future paths of the rate hikes resembles an oil tanker.

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Perhaps Canada should re-invent maple syrup and pancakes to improve exports.

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