Posthaste: The fiscal ‘floodgates are about to be flung open,’ as businesses look for a bazooka in Trudeau’s speech today

Posthaste: The fiscal ‘floodgates are about to be flung open,’ as businesses look for a bazooka in Trudeau’s speech today

Good Morning!

Palpable stress among Canadians about their physical and financial well-being has been the underlying theme of the weekend.

Most people had a cathartic freakout at grocery stores by stocking up on essentials and many non-essentials in a bid to feel better. But as the country’s economic gears grind to a slow halt, Canadians are looking for some kind of a bailout or bazooka-like fiscal stimulus from Ottawa and the provincial governments.

So far, it is the Bank of Canada that has really stepped up, cutting interest rates by a full per cent in two installments in one week.

After the U.S. Federal Reserve had its own ‘panic attack’ (in the words of economist David Rosenberg), the Bank of Canada is expected to follow suit.

“There is absolutely no reason to wait. We doubt that the Bank will even wait for the FOMC meeting, and we might see a 50-75 basis point cut by the Bank on Monday or very shortly after,” said Benjamin Tal, economist at CIBC Capital Markets said in a note to clients. “While Governor Poloz has suggested in the past that he sees the effective lower band for the policy rate at negative 0.5%, we doubt that he will be willing to test that level at this point.”

Although RBC Capital Markets characterized Fed’s move as  a ‘bazooka’, markets are not reacting well and are expected to crash this morning.

In Canada finance minister Bill Morneau also took some important steps last week, but the feeling was that it was underwhelming.

However, “among the options Morneau indicated that were under consideration is how to provide direct support to households,” wrote Scotiabank in a note.

BMO says in the U.S., smaller businesses, especially in the tourism and restaurant industry, may have no choice, however, but to shed staff, which is why the fiscal rescue plan is so important.

The same is true for many Canadian businesses that are, at least anecdotally, sending worrying emails to staff, informing them about the dire times ahead. WestJet is already eyeing staff cuts as it mothballs planes due to travel limits.

Sherry Cooper, chief economist at Dominion Lending Centres, is expecting a fiscal stimulus in the order of 1% of GDP from Ottawa, that would include providing direct aid to individuals and families. “The floodgates are about to be flung open.”

Here’s what you need to know this morning:

  • Prime Minister Justin Trudeau will address the COVID-19 situation in Ottawa at 1 p.m. ET. Deputy Prime Minister Chrystia Freeland, accompanied by Minister Patty Hajdu, Minister Jean-Yves Duclos, Minister Bill Blair, Minister Marc Garneau, and Chief Public Health Officer of Canada Dr. Theresa Tam, will also be speak at the National Press Theatre
  • Dr David Williams, Chief Medical Officer of Health, and Dr. Barbara Yaffe, Associate Chief Medical Officer of Health, to provide update on COVID-19 in Toronto

There is no comparison between then and the current economic crisis brought on by the outbreak of the coronavirus, according to economist David Rosenberg said.

That is because, this time, it’s worse, writes Victor Ferreira. Read the full story here.

— Please send your news, comments and stories to yhussain@postmedia.com.

— Yadullah Hussain @Yad_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg

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