Why the Bank of Canada’s ’emergency surgery’ rate cut didn’t work

FP0613_Canadians_owe_alot_wealthier_620_ABFor months now, Bank of Canada Governor Stephen Poloz as well as an accompanying chorus of economists happen to be predicting that the second quarter would be turnaround time.

\’R\’ word returns to haunt Canada as economy does not shake off oil price plunge

Data out this week showed the damage of oil’s collapse is deeper than many thought, raising fears that we\’re slipping into recession and speculation the Bank of Canada will cut rates. Read on

Yes, the very first quarter stank, because of the oil price shock. But in the second quarter, the \”insurance\” the financial institution took out in January – a 0.25-per-cent rate cut – would have had time for you to work its magic, exporters would start obtaining the slack in the oil patch, and the tide would turn.

Well, now we know that\’s kind of a pipe dream.

Statistics Canada released its gdp report this week, and it demonstrated that GDP fell by 0.1 percent in April. Just about every economist in the land have been predicting at least a modicum of growth as the first step in a rebound from a dismal first quarter during which GDP shrank by 0.6 per cent.

The rebound didn\’t happen. And it very well might not happen in May and/or June. If it doesn\’t, then we\’ll have two consecutive quarters of contraction. Which, technically, is a recession.