BoC: On hold and awaiting clarity on US policies – HSBC

David Watt, Economist at HSBC, notes that the Bank of Canada left its policy rate unchanged at 0.5% yesterday as the discussion of the appropriate stance of policy was dominated by the uncertainty surrounding policies in the US.

Key Quotes

“The Bank's economic outlook incorporated an initial assessment that fiscal stimulus in the US could boost demand for Canadian exports. That effect though was seen as offset by a loss of competitiveness due to lower US corporate taxes. The Bank's base case outlook did not include the possibility of protectionist trade measures in the US. The outlook will be modified as US policy uncertainty is resolved. The Bank, nonetheless, stressed that the US and Canadian economies are in different stages of the economic cycle, that higher bond yields are at odds with the macroeconomic situation in Canada, and that rate cuts are still possible.”