Surprising gains in output and inflation will probably keep Bank of Canada Governor Stephen Poloz from signaling looser monetary policy again after the central bank sent dovish messages on its last three announcement dates.
Canada was the envy of developed economies following the global recession, boasting the world’s soundest banks and a robust housing market that helped push its currency above parity with the U.S. Those days are gone.
The Bank of Canada may drop its bias for raising interest rates as a slowing global economy reduces demand for the nation’s exports such as metals and fertilizer, ending its outlier status among the Group of Seven.
Canada’s December inflation rate accelerated less than economists forecast, leaving it near the bottom of the central bank’s target band and reinforcing policy- maker warnings that price gains will be sluggish.
Canada unexpectedly reported a return to large merchandise trade deficits and a decline in business investment, pushing the dollar to the weakest in three years and suggesting a transition away from consumer spending as the primary economic growth driver is further delayed.
Employment and housing figures released today confirm that Canada’s economy is cooling faster than the central bank had forecast, indicating the Bank of Canada will refrain from raising interest rates until next year, economists said.
Canadian factory sales unexpectedly fell in June, with the third decline in four months underlining the struggles faced by exporters in rebuilding sales even as the U.S. economy shows signs of strengthening.