Bank of Canada unexpectedly cuts interest rate

Major central banks around the world continue to surprise markets. The latest unexpected move came all the way from Canada, where the Bank of Canada suddenly lowered the target for its overnight rate by a quarter of a percentage point to 0.75%, for the first time since 2009, responding to the recent precipitous decline in oil prices, which is estimated to be negative for the Canadian economic growth and underlying inflation. The central bank forecasts that oil prices will rebound slightly to $60 per barrel over the medium term, but policymakers believed that the negative effect of lower crude prices would be gradually mitigated by a robust US economy, a weaker Canadian Dollar, and the central bank's monetary policy decision. The BoC sees the economy to steadily recover in the second half of the year, with real GDP growth averaging 2.1% this year and 2.4% in 2016. The economy is projected to return to full capacity around the end of 2016, a little later than was expected in October. 

On top of that, Canada's wholesale sales unexpectedly declined in November, the first decrease in 11 months, driven by weaker sales of machinery and equipment. Wholesale shipments dropped 0.3% to C$54 billion, Statistics Canada reported, with machinery and equipment wholesalers posting a 2.8% fall in the reported month. Wholesale sales have risen 6.7% over the last 12 months, while the volume of sales, which strips out the impact of price changes, contracted by 0.3%.