As Canada’s economy continues to come out of a technical recession, experts are debating whether the BoC needs to further cut interest rates to help stimulate growth.
CIBC’s president and CEO Victor Dodig says, “I don’t think we need a rate cut. The Canadian dollar provides all the stimulus we need.”
He adds, “If we have a 0.25% cut, I think [our bank] could manage that. As it gets to 0%, it becomes more challenging.”
Dodig is one of several bank CEOs speaking at RBC Capital Markets Canadian Bank CEO Conference today in Toronto.
Royal Bank CEO Dave McKay commented on the oil industry. He expects oil to start moving back towards the $50-a-barrel range — and maybe slightly above — over the next 18 months. “It’s a little softer than anybody predicted right now,” McKay says.
So far, however, McKay says Canada’s economic woes have been contained within oil-producing provinces, particularly Alberta, while other regions are being helped by a decline in the dollar’s value. “You’re seeing that weaker Canadian dollar drive great strength in B.C. … You’re seeing great strength in Toronto.”
Meanwhile, recent declines in the price of crude have spurred BMO to stress-test its oil and gas sector portfolio to see how it would perform at $25-a-barrel oil.
BMO chief executive Bill Downe says the bank is also stress-testing its broader loan portfolios — which includes consumer mortgages, credit cards and auto loans — for an average of $35 a barrel over the course of the year.
For 2017, BMO is using $30-a-barrel oil for its stress tests, and for 2018 it’s considering the potential effects of a $40-a-barrel scenario. Crude oil futures are currently trading at about US$32 a barrel.
But how low will oil prices go? Morgan Stanley is predicting that the rising U.S. dollar could push Brent oil as low as US$20 a barrel, reports Bloomberg. Read more.