–Hints that Canada’s Central Bank to Echo Fed’s Dovishness
By Peter Diekmeyer
OTTAWA (MaceNews) – Senior Deputy Governor Carolyn Wilkins provided hints Thursday that the Bank of Canada will continue to mirror the U.S. Federal Reserve’s increasingly dovish policies.
“We worry a lot about the downside,” said Wilkins to Toronto Board of Trade audience members following an afternoon presentation. “Financial institutions are well capitalized and have good liquidity”
Wilkins’ core presentation, which dealt with why the Canadian labor market continues to suffer from slower-than-expected wage growth, despite being “in good shape overall,” was broadly positive.
She attributed the development to multiple factors including reduced worker bargaining power in today’s so-called gig economy. The BoC projects that Canadian activity will pick up again in the second quarter, following a slow start to the year, which officials say should lead to a pickup in wage growth.
However, Wilkins’ assurances regarding the solvency of local banks, which echoed similar comments by Secretary of the Treasury Steven Mnuchin about U.S. banks late last year, provided another a reminder of the inter-connectedness of the two economies.
The Bank of Canada has committed to basing future interest rate hikes on changes in data and how the economy responds to weak crude prices and global trade concerns. Following the Bank of Canada’s rate announcement earlier this month Governor Stephen Poloz indicated that the pace of tightening could slow.
The BoC has raised rates five times since its current cycle began in July 2017. However, its stand-pat approach during its last two announcements has broadly coincided with President Donald Trump’s badgering of the U.S. Federal Reserve to keep rates low.
Markets will be keeping a close eye on Bank of Canada Deputy Governor Timothy Lane’s presentation in Washington next week for further signs of policy alignment.