OTTAWA – It’s the Bank of Canada’s use weigh in around the country’s economy.
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Monetary policy officials have remained around the sidelines because the election in October of a new authorities – one that campaigned on the requirement for fiscal muscle to lift the economy and obtain more Canadians working.
Last week’s Liberal budget offered tens of billions of dollars annually in stimulus spending – and deficits – until the next national vote 4 years in the future.
The Bank of Canada presently has Ottawa’s economic forecasts and stimulus plans at hand, and governor Stephen Poloz and his policy counsel are starting to include them to their own domestic outlook and how that will translate into the central bank’s next rates of interest decision April 13.
But the very first steps forward can come now, with one of Poloz’s deputies delivering a midweek speech in Edmonton, accompanied by key surveys of Canadian business leaders on views from the economy as well as their plans for the rest of the 2016.
“We’ll be listening closely (to the speech) for that bank’s ideas on last week’s federal budget and how that may shape their growth outlook,” said Benjamin Reitzes, senior economist at BMO Capital Markets.”
“The BoC’s growth forecast will surely be revised higher, (but) just how much may be the question.”
Poloz has been holding his cards close to his chest prior to Justin Trudeau was elected pm in the Oct. 16 national election, ousting Stephen Harper’s Conservatives, which after the bank’s March 9 “no-change” rate of interest announcement – waiting, instead, for information on spending within the March 22 budget.
There will likely be some initial indication of the bank’s look at your budget on Wednesday, when deputy governor Lynn Patterson talks to the Chamber of Commerce of Edmonton on the topic, “Adjusting to the Fall in Commodity Prices: A measure at any given time.” She’ll also take questions from the audience, that could provide an opportunity for unscripted remarks around the economy.
The Bank of Canada’s first response to the energy plunge came more than a year ago. With the floor falling out of global oil prices, Poloz delivered some shock treatment in the form of a January 2015 25-basis-point rate cut – the very first move on lending rates since September 2010 – accompanied by a second cut of the equal amount in July this past year, using the trendsetting policy rate to the current degree of 0.5 per cent.
By then, however, the country had already experienced a two-quarter technical recession.
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The Liberal Party was presented with a nominal surplus from the Conservatives of $1.9 billion for fiscal 2014-15. The Trudeau government has set the nation on target for any return to shortfalls, with an expected $5.4-billion deficit in 2015-16 and rising to $29.4 billion in the following fiscal year before the red ink is forecast to shrink to $14.3 billion by 2020-21.
The central bank doesn’t appear in a hurry to regulate its key lending level, given still-weak oil prices and accepting – for the time being – a softer-for-longer dollar, using the economy struggling to get back right into a sustainable growth pattern.
The U.S. economy has provided one of the few glimmers of expect stronger growth in this country, which greatly depends on its largest trading partner for export dollars.
On Tuesday, U.S. Fed chairperson Janet Yellen offers a speech towards the Economic Club of recent York. She’ll also take questions from economists following her prepared remarks – of particular interest will be any indication the Fed will keep its interest-rate road to two hikes this year, instead of four as original planned, on initial signs that U.S. growth slowed within the fourth quarter of 2015.
“The Fed’s actions also matter to the BoC,” said Derek Holt, vice-president of Scotiabank Economics. “The BoC probably wouldn’t want to give a renewed easing bias if it thought the Fed would remain in hike mode this year.”
This week will also see U.S. employment data for March, to be released on Friday, the same day because the Bank of Canada publishes its quarterly Business Outlook Survey of senior business managers and it is Senior Loan Officer Survey of business-lending practices.
gisfeld@nationalpost.com
Twitter.com/gisfeld
