The situation currently being managed by the Bank of Canada might be more similar to Norway than to the U.S., according to long-time markets observer Kevin Carmichael.
In a recent piece for the Financial Post, Carmichael noted that the emerging signs of slowing stock markets worldwide will have considerably different impacts on both sides of the border.
This is especially because the U.S. is smarting from the current cross-Pacific trade war.
“The Bank of Canada probably has more in common with the Norges Bank for now than it does the Fed,” Carmichael explained. “Both oversee rich, mid-sized economies that rely on commodity prices and external demand to a greater degree than most developed economies. Both were inclined to raise interest rates until conditions outside their control upended their plans.”
Last month, the BoC decided to retain its interest rate at 1.75% for the sixth consecutive policy meeting. With its next decision point in September, Carmichael noted that the bank might follow Norway’s lead.
“The global risk outlook entails greater uncertainty about policy rates going forward,” the analyst quoted the Norway central bank’s statement on its latest decision to leave its rates unchanged.
Jobs growth across Canada has wound down some, although it’s still at a comparatively full-employment state.
“Non-energy exports plunged in May, but they had surged in April. The most recent data suggest companies were gearing up to invest fairly heavily this summer. Oil prices are down from July, but they haven’t gone over a cliff.”
Taken together, these trends indicate that Canada will have to be particularly careful in dealing with looming risks – risks that might undo some significant gains.
“The Bank of Canada was forced to the sidelines last autumn by a sharp drop in oil prices and a nasty winter that paralyzed trade in North America and very nearly stalled the economy. Now, it’s facing depressed demand for exports that likely would snuff out a relatively recent rebound in business investment.”