The impacts of the escalating U.S.-Canada trade dispute will “figure prominently” in the Bank of Canada’s decision-making process for its upcoming interest-rate decision, governor Stephen Poloz said in a speech Wednesday.
In prepared remarks of his address, Poloz said the bank has been incorporating into its projections the fallout of U.S. steel and aluminum tariffs as well as retaliatory measures by Canada and others.
The Trump administration announced it would slap punitive tariffs on Canada and other allies on May 31 — a day after Poloz made his last interest-rate announcement.
Before U.S. President Donald Trump imposed the tariffs, experts had widely predicted Poloz to raise his trend-setting rate at the upcoming July 11 policy meeting.
Since then, however, there have been growing doubts Poloz will hike at next month’s meeting.
The deterioration of U.S. trading relationships with Canada and other key economies around the world is a key reason. But there are other factors complicating the interest-rate outlook since the May 30 announcement, including unexpectedly weak inflation and retail sales numbers, and expectations that Friday’s reading for real gross domestic product from April will show a decline.
In his speech Wednesday, Poloz pointed to another set of numbers under close scrutiny by the bank ahead of July’s policy meeting.
The bank’s ongoing analysis of data — at an individual level — of how new lending rules are affecting the housing market and mortgage renewals will also be central in the decision-making process, he said.
“We expect these issues to figure prominently in our upcoming deliberations,” Poloz said of the mortgage data and the deepening U.S.-Canada trade battle.
Poloz has introduced three rate hikes since last July following an impressive economic run for Canada that began in late 2016.
But he’s kept the benchmark rate at 1.25 per cent since January as the bank continues its careful process of determining the best timing for its next hike.
Poloz’s speech was to the Greater Victoria Chamber of Commerce.
His address focused on the Bank of Canada’s ongoing efforts to provide more transparency and clarity on its monetary policy decisions and to make economic issues more accessible to a broader section of the general public.
“The challenge for us is to make sure that when we have a message to deliver, you will not need a degree in economics to understand it,” he said.