Recent economic data with respect to Canadian job losses has led to the Loonie dropping half a cent.

The Loonie’s drop in value is also due to the price of bonds increasing with the 10 year bond up 20 cents.

View entrie article from the Globe and Mail.

Their is an inverse relationship between the price of bonds and interest rates. When the price of bonds move up, there is downward pressure on rates.

A more detailed explanation on this relationship can be found in this article from Globe Investor.

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The US Federal Reserve, the European Central Bank, and the Bank of England, are holding their central bank prime rates steady. The Fed is at 0 to 0.25%, the ECB is at 1.00%, and the BoE is at 0.50%.

Only Australia, Israel, and Norway have raised rates on the prospect of an improving economy.

View entire articles: CBC News, and Financial Post.

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The Bank of Canada’s inflation target remains at 2%. For as long as we are reporting inflation under this level, we should not see any increases in the Canadian prime. Full Article: Canada News Centre.

What exactly is inflation? It is the price we pay for our goods and services. If demand is up, prices increase. Demand falls, and prices decrease. Growth in the ecomony = more consumer spending = upward pressure on inflation.

How is inflation in Canada measured? Statistics Canada is our inflation tracker via the CPI or Consumer Price Index. Prices are checked monthly at major retailers for approximately 600 different household items the average Canadian family consumes. More important items, such as rent, carry more weight in the calculation. Approximately 650,000 prices are checked each year across Canada.

The Central Bank pays closest attention to the Core Rate of Inflation. The Core Rate of Inflation is the same 600 goods priced without the most volatile influences such as oil & gas prices, fruit & vegetables, mortgage interest, intercity transportation, and tobacco products. Full article: CBC News.

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