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'Bank of Canada must keep country competitive'

October 30, 2019


The Bank of Canada’s policy is expected to be pitted starkly against the Federal Reserve’s decision today when the two central banks both make interest rate announcements.

There appears little uncertainty among professionals and analysts that while Governor Stephen Poloz will opt to stay pat, marking a year of the benchmark rate remaining unchanged at 1.75%, his American counterpart Jay Powell will reveal the third decrease this year.

Grant White, portfolio manager and investment advisor at Endeavour Wealth, Winnipeg, acknowledged that the BoC was in a holding pattern but expected them to revisit that stance in three to six months’ time when the country may need more stimulus – some areas more than others.

He told WP: “It's kind of an interesting time in Canada because certain regions I would argue need more help than others. They’re making an interest-rate decision based on the average, but some regions could probably use some help earlier on.”

The TSX moved higher yesterday after positive earnings results while U.S. markets dipped slightly lower ahead of an expected rate cut. The S&P/TSX composite index closed up 30.61 points to 16,418.14.

With economic data stabilizing and improving in the US, the market will be analysing Powell’s language, with observers preparing for a more hawkish tone.

While the BoC’s resistance to following the Fed bucks historical trends, White said the loonie and Canada’s competitiveness is more of a concern.

“The biggest thing that Canadians always has to worry about is currency and especially how it relates to the US dollar,” White said.

“They’re ok right now but it’s something they have to manage and if the Fed is going to continue to drop and the United States becomes that much more attractive for business and for money, then definitely Canada needs to worry about that.”

He highlighted Alberta as a region where that competitiveness is vital; a province waiting for the next oil boom that might never come given the amount of cheap oil and gas coming out of the US.

He added: “The Canadian government needs to be conscious of the fact that we have to stay competitive, and interest rates play a part in that. If our dollar becomes that much more expensive to buy our goods with or commodities with, then buyers might look elsewhere.”

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