The Bank of Canada has announced it will hold firm at a 0.25 per cent interest rate for now; and, given the commentary around the announcement, likely for some time.
According to J.P. Gervais, chief economist with Farm Credit Canada, it’s not an unexpected outcome.
“When you comb through the [Bank of Canada] statement, what you’ll find is that they’re going to be recalibrating their quantitative easing program, so basically they’re going to try to have more impact on longer-term interest rates,” says Gervais.
Central banks have more of an impact on long-term maturity assets, so they’ll be focusing their efforts there. Practically, the Bank of Canada’s interest rates are at the lowest point they can be, and they’ll be scaling back the amount of assets they purchase, according to Gervais.
Something Gervais is surprised by is the economic forecast for the Canadian economy which will be down by 5.7 per cent — between four and five per cent is normal. A subset of business and workers is doing alright during this crisis, but there’s another subset — food service, as one example — that is not doing well at all.
Shifting the focus to the agriculture sector, GDP numbers for August and an advanced estimate should be released this coming Friday. Third-quarter numbers from the U.S. should be released soon, too. The market expects that most numbers in the agriculture industry are pointing upward, with some exceptions, such as livestock, which has been more hampered by supply chain issues.
“It’s a very nuanced type of recovery that we’re seeing, and I think it’s important to make the distinction and analyze sector by sector and understand where it’s going,” says Gervais.
Tune in to the full conversation for more on the currency market outlook, market directions of ag and food, and land prices from Gervais: