Wednesday, 23 April 2008

Oil hits record high, BoC lowers interest rate

Crude oil hit another record high yesterday. Bloomberg reports:

Crude oil rose to a record $119.90 a barrel in New York as the dollar dropped to an all-time low against the euro, prompting investors to purchase commodities as an inflation hedge.

Oil gained as the dollar touched $1.60 per euro for the first time after European Central Bank policy makers signaled they may raise interest rates because of inflation. Crude's 24 percent surge this year pulled gasoline and diesel to records, weighing on an economy already reeling from a credit crisis...

The falling dollar and higher global demand for raw materials have led to records this year for commodities including gold, corn, soybeans and rice. The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, gained 1.2 percent to 1521.008 today, up 37 percent from a year ago.

The rising prices of commodities, however, didn't stop the Bank of Canada from cutting its benchmark rate again yesterday. Bloomberg reports:

The Bank of Canada lowered its benchmark rate by half a point to revive an economy that's growing at its slowest pace in 16 years, and signaled more easing may be needed.

Governor Mark Carney and his five deputies cut the rate on overnight loans between commercial banks to 3 percent, the lowest since December 2005, a move predicted by 28 of 32 economists in a Bloomberg News survey.

The projections for growth and inflation in the central bank's statement today indicate policy makers may ease again as soon as their next meeting on June 10, economists said. The bank cut its 2008 growth forecast to 1.4 percent, the lowest since 1992, from a January prediction of 1.8 percent, and said inflation will stay below their 2 percent target until 2010.

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