OTTAWA, Ont. — The Canadian trucking industry will be paying more attention than usual when the Bank of Canada issues its stated intentions on whether to cut interest rates on Monday.
According to David Bradley, CEO of the Canadian Trucking Alliance, the central bank “has to cut its target overnight interest rate by at least 50 basis points if it wants to moderate the appreciation in the value of the Canadian dollar compared to the US greenback.”
He says that this year’s 15-17 per cent increase in the value of the Canadian currency is having a major negative impact on the Canadian trucking industry, which was already struggling to cope with sky-rocketing insurance premiums, record-level diesel fuel costs and higher prices for new equipment.
Many trucking companies – depending on their size and the amount of transborder work they do – are losing tens of thousands to hundreds of thousands of dollars a month in revenues just from the exchange rate impact. Many are trying to adjust their rates in response, but they are having little success. Some have begun to lose business to US carriers. Bradley says that some trucking companies may not survive unless the Bank of Canada takes strong action.
“Anything less than 50 basis points will not do it, in our view” says Bradley. “The Bank of Canada has increased its target overnight four times since June 2002 and twice, by 25 basis points each time, this past spring alone. At the same time, the US Federal Reserve Board has lowered its policy-setting short-term rate twice during the last 9 months for a total drop of 75 basis points.”
“The world and economic prospects has changed significantly in recent months. In hindsight, the 200 basis point increase in the gap between Canadian and US interest rates in the last year and a half seems misplaced, especially in the last six months where we have seen the Canadian dollar leap in value and the Canadian economy begin to sputter. “No country on the planet is as dependent upon trade with one other country as Canada is dependent upon exports to the US. Choking off our export trade is like killing the goose that laid the Golden Egg,” says Bradley.
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