The Globe and Mail reports in its Thursday, Dec. 6, edition that there is nothing quite like an oil market slump to turn Bank of Canada Governor Stephen Poloz's thinking around. The Globe's David Parkinson writes that in late October, when the BOC raised its key interest rate a quarter of a percentage point to 1.75 per cent, it sounded upbeat about Canada's economic prospects. The economy was running very near full capacity. The conclusion of Canada's trade negotiations with the United States and Mexico had removed a huge uncertainty hanging over the economy, clearing the way for a new wave of business investment and export growth. In light of the economic health, the bank signalled that it wanted to move rates considerably higher, and possibly faster, too.
By contrast, Wednesday's stand-pat rate announcement was a distinct downer. The tone of confidence has been replaced by caution, even outright worry. So much so that the financial markets, upon reading the bank's words, beat a hasty retreat from their rate-increase expectations, both for the near term and for next year as a whole. A severe slump in prices for Alberta crude has thrown Mr. Poloz for a policy-setting loop.
© 2019 Canjex Publishing Ltd. All rights reserved.