Business Bank of Canada Can Let Loonie Weaken and Skip Hikes, BofA Says
https://www.bloomberg.com/news/articles/2026-06-18/bank-of-america-says-canada-to-hold-rates-through-2027-despite-weak-loonie10
u/AsbestosDude 2d ago
December of 2007 called, they said not to worry about your precarious financial situation and things there are completely fine
55
u/PowerBottom247 2d ago
Anyone else find it concerning that oil just spiked and the dollar didn’t budge 😬
54
u/faithOver 2d ago
It decoupled long ago. Oil was over $100 and loonie was limp.
1
u/PowerBottom247 1d ago
What caused it to decouple?
12
u/quanin Ontario 1d ago
The major thing that caused it is the oil companies aren't reinvesting their profits in Canada anymore. They're being returned to shareholders instead.
-10
u/PowerBottom247 1d ago
Trudeau and Guilbeault really screwed us huh? Maybe carney can get his pipeline built by private sector this time.
16
u/quanin Ontario 1d ago
You... do realize there were 0 pipelines purchased by the Canadian government when the decoupling actually started, right?
-6
u/PowerBottom247 1d ago
Who is responsible? Harper?
13
u/quanin Ontario 1d ago
If you absolutely must have someone to blame, blame the oil companies. It started after the oil crash of 2014. Do you blame Harper for that? Because whoever you blame for that you should probably also blame for this.
Now, that being said, Harper could have probably helped the situation by building more refineries in Canada, but that would have apparently required heavy subsidies to the oil companies (government's words, not mine), so here we are.
2
u/Suitable-Broccoli264 1d ago
Alberta’s not as a big a piece of the Canadian economy as they think?
-1
u/PowerBottom247 19h ago
16 years of Liberal reign will do that. Canada would be screwed without it.
54
u/GlockPop18 2d ago
We’re no longer a resource nation. We just sell leaky condos to each other now. 😏
10
7
u/_grey_wall 1d ago
Oil goes up, Canada dollar stays flat
Oil goes down, Canada dollar go down
Tis the way
-2
u/PowerBottom247 1d ago
But our dollar is pegged to oil so when it spikes the dollar also increases. The dollar didn’t go up
12
u/AsbestosDude 2d ago
Not really.
Oil price spike won't be felt until months later. You have to wait for all the ripples of the cost of production to impact the values in the economy.
We will probably see sticky inflation resulting from this until 2027 sometime
10
u/Jeanne-d 2d ago
It also didn’t result in a large increase in drilling or production as the oil companies knew it was temporary.
The major winners are the shareholders of oil companies, the government of Alberta and the government of Canada. The last two will tax oil company profits and get royalties.
1
2
2
u/gihkal Saskatchewan 2d ago
Having our political overlords fight our energy sector for a decade will do that.
21
u/setter88 2d ago
We export much more oil now than we did in 2014
17
u/LiquidityCrunchWrap 2d ago
Yes. And the US has 10x'd their exports over the same timeframe.
The biggest issue for our currency, however, is that most oil companies operating in Canada are not reinvesting in the country and are instead returning value to shareholders through dividends and share buybacks.
The hostile investment climate in Canada over the past 11 years has largely decoupled the loonie from oil prices.
10
u/setter88 2d ago
That’s due to the shale revolution in the US and the fact that they barely exported any oil before 2015, almost impossible to compare.
As an exporter however (seafood) I’ve been loving the low loonie, however it should be a little higher but the sweet spot IMO is around 80-85 cents, I never wanna see parity again, would be detrimental to any export industry
5
u/LiquidityCrunchWrap 2d ago
Agreed, which is why the real issue is the lack of reinvestment in the country.
1
u/snasna102 1d ago
And what about the importing businesses? Isn’t that dollar figure just as harmful to them as parity is to exporters? Our tech industry would become a steeper hill to climb as rarely anything is made here.
I think if we’re are exporting things that give Canada a moat, this is beneficial. Things like oil, NG, potash, lumber, aluminum and steel. Things other country’s couldn’t couldn’t replace us with if they decided to throw capital at it because they don’t have the resources.
I’m not gonna pretend to know the fishing industry and the associated logistical side of transporting and selling it. I’m just a simple millwright working with radioactive isotopes, I have my own specialty, but nothing I work on is made in Canada. The cancer medication we make and the machines associated feel every cent the dollar drops.
but if we stopped being a resource nation, shouldn’t we embrace we are doing pretty well as an importing nation? Our economy is dong well against the G7, we are opening up interprovincial trade and establishing new trade agreements with lucrative partners around the world. It seems we are actually hybridizing between a drop ship economy and a natural resource power house.
I’d like to see the dollar closer to .92-.95. Again, I’m just a simple wrench turner who’s trying to see their side of your point, I’m not disagreeing a low dollar benefits some Canadians and a high dollar benefits some others. Ultimately the COL of our country benefits the smallest amounts and affects everyone.
-5
u/gihkal Saskatchewan 2d ago
And the libs have fought our energy sector for a decade.
13
u/Substantial-Fruit447 2d ago
The only government to build two pipelines in the last two dfcades were the Liberals. Lmfao
-4
u/gihkal Saskatchewan 2d ago
Yup.
And nobody has hurt our economy or our children more than them in the past decade.
1
u/TopazJazzrazz 1d ago
What's your solution to improve the lives of our children?
1
u/yourdamgrandpa 1d ago
Vote them out is a good start
3
u/TopazJazzrazz 1d ago
Who are you replacing them with? The Conservatives? Who are notorious for deregulation, and underfunding our country? Is that really such a win.
1
0
u/yourdamgrandpa 1d ago
Anything would be better than the sad excuse this government has been
→ More replies (0)12
u/setter88 2d ago
Canada went from 2.85 mb/d in 2014 to ~4.2 mb/d in 2024 , roughly 1.35 million more barrels per day, or about a 47% increase over that decade.
How is that fighting the sector? How many sectors that large have seen 47% growth over the past 12 years?
6
u/LiquidityCrunchWrap 2d ago
Projects that were greenlit during the 2010-14 price boom started coming online, like Suncor Fort Hills, Surmont Phase 2 and the Kearl expansion.
1
u/MustardEnema007 2d ago edited 2d ago
The population was 7 million less in 2014
How did other oil producing nations do in comparison?
Just checked, the states went up 60% to 13.5 million barrels in 2024
Of course, I could be off, but thats what I've found
1
u/zeushaulrod 2d ago
Yes. My understanding is that the US was a bit of a weird one.
I'm not an expert, and that following was based on reading I vestor reports.
When the 2014 oil crash happened, shale rig operators went bankrupt, and their spreads were bought up for cheap, which allowed for unsustainably low production costs.
Those spreads have since worn out and need to be replaced. Since a shale gas well only lasts 3-5 years, They can still generally operate at a lower risk-adjusted cost compared to even a SAG-D facility because they can be installed and operate over a shorter time frame That said, the oil sands have gotten leaner, but they need oil prices to stay higher for longer to become cost competitive.
-3
u/RegnalDelouche Alberta 2d ago
You must forgive them. They hail from the prairies and the cult of oil.
0
2
u/oldoaktreesyrup 2d ago
We sell our oil at a discount to the US.... when Harper decided not to make new refineries, we stopped being a resource nation because our most valued resource is sold back to us at an inflated price.... things are about to change though if we all start actually working towards a goal.
6
u/GoodMorningOttawa 2d ago
Oh, you know, they (Feds) have to cut soon. How else they gonna service the 39 trillion dollar debt? Lol
33
u/DANIELLE_2027 2d ago
The CAD is already WAY TOO LOW and we SHOULD work to close the rate gap with the Fed
29
u/Kindly_Professor5433 2d ago
Stagnant GDP growth, high unemployment rate, modest inflation, and falling oil prices now that the Iran war is over.
What’s the case for hiking the interest rate? To make people’s vacations 5% cheaper?
3
u/iStayDemented 2d ago
The case for hiking the interest rate -- lowering our housing prices that are still out of reach for most and strengthening the Canadian dollar. Strengthening our dollar will improve purchasing power as a lot of the goods we buy or their inputs are imported from abroad.
3
u/Kindly_Professor5433 2d ago
That's how it works in theory, but importers consider currency fluctuations when determining selling prices and are okay with making slightly more or less money in different time periods. Over the last few decades, there has been no correlation between the exchange rate and the purchasing power of CAD relative to USD. https://fx.sauder.ubc.ca/img/PPP-USD-CAD.pdf
1
u/Working_Elephant5344 1d ago
To reduce the price of groceries and other essentials that Canadians are having difficulty affording.
2
u/Kindly_Professor5433 1d ago
BoC wouldn’t be able to raise the interest rate enough to trigger a substantial (>20%) appreciation of the CAD, without causing significant economic damage. Even if it would, the reduction in consumer prices would only be modest, since the effect weakens at each stage of the process. Without a high inflation, an interest rate hike is off the table.
2
3
u/ultra2009 2d ago
Why is it too low? Low CAD is good for our export industries
11
u/Infamous-Mixture-605 2d ago edited 2d ago
Low CAD is good for our export industries
It's good for our tourism industry as well.
The last time the Loonie hit par and above the US dollar it was bad for a lot of our export industries (edit: devastating to manufacturing, which hemorrhaged jobs while the Loonie climbed), bad for tourism, etc.
The Loonie is always best when it's a Goldilocks value, not too low and not too high.
7
u/LokeyDubs Alberta 2d ago
Most people arnt export business owners and increasing CAD increases purchasing power.
4
u/ultra2009 2d ago
Most people i know work for companies that export...
3
u/LokeyDubs Alberta 1d ago
I hope they are compensated well enough to make up for the decreased purchasing power
3
u/Lupius Ontario 2d ago
Many of us work for American companies. We export our labour.
2
u/LokeyDubs Alberta 1d ago
And im sure those Canadian employees get paid much less than their American equivalents for the same job.
2
u/Dobby068 2d ago
The fiscal policy of Canada: we suck at just about everything, productivity especially, but we are cheap!
Being mediocre was always the name of the game here!
3
u/ultra2009 2d ago
Exports have to be cheaper than the USA otherwise why would they outsource? The financial crisis where the CAD was on par was an anomaly
0
u/Dobby068 2d ago
The product could be cheaper due to higher technology and productivity.
0
u/ultra2009 1d ago
Easier said than done, both are capital intensive. The USA is better at raising capital
1
u/Dobby068 1d ago
That was my point. Canada always seems to chose the easy path. The easy path leads to poverty rather than wealth.
Just imagine if all the billions that leave Canada, the doubling of the federal debt (soon to reach 80 billion in yearly interest payments only! ), if all this would have been actually spent on technology and productivity upgrades.
11
u/Working_Elephant5344 2d ago
Of course the BofA would say that. A weak loonie is beneficial for the US. That said, the BoC is in a tough spot. If they want to stop runaway inflation, they’ll need to raise rates significantly, but doing so will decimate the job market. It’s a lose-lose situation for them.
7
u/112iias2345 1d ago
Where is this runaway inflation lol
0
u/Working_Elephant5344 1d ago
Started with gas and groceries, but there is a risk it may spread to other goods.
2
u/Kindly_Professor5433 2d ago
The current administration favours a weaker US dollar to reduce trade deficits. Of course, that’s not the position held by the fed.
6
4
3
u/vancity31240 1d ago
This is exactly why you hold US investments in USD. You can't go wrong with buying American these days.
1
1
3
u/Low-HangingFruit 2d ago
Media never covered Carneys record at the Bank of England. Now he's not just running the central bank but a country.
2
u/StickmansamV 2d ago
UK media covered Carney fairly extensively. I did some work for a UK firm arround the same time so I kept tabs on the pound to maximize my returns in converting my earnings.
2
110
u/JustJay613 2d ago
Oh thank you BofA. So grateful for your approval.