Canada

Thursday, May 30, 2019 - 14:15

MNI POLICY: BOC's Wilkins: Trade War is Recovery Wild Card


By Greg Quinn

OTTAWA (MNI) - Bank of Canada Senior Deputy Governor Carolyn Wilkins said the threat of a prolonged global trade war is the ``wild card'' to an economic recovery that still requires stimulative interest rates. Wilkins said future decisions on a policy rate, held at 1.75% on Wednesday, will focus on trade disputes, oil markets and domestic household spending. Canadian business activity is being held back by global trade fights and her own country's bilateral disputes with the U.S. and China. Most of Wilkins' remarks Thursday reiterated the outlook expressed in Wednesday's interest-rate decision, including the key phrases that stimulus ``remains appropriate'' and policy makers stay ``data dependent.'' Some investors are betting on a rate cut later this year while most economists say the BOC is on hold in 2019. The growing evidence that Canada's economic growth will accelerate over the rest of this year must be weighed against the longer-term risk of worsening trade conflicts such as between the U.S. and China, Wilkins said. ``This remains a major preoccupation for us,'' she said about the risk of protracted trade wars. Business investment in Canada will expand gradually led by non-energy companies focused on new technologies, while oil and gas producers may cut investment by a further 20%, she said.

Here are some other highlights from her speech in Calgary:

- Business investment as a share of Canada GDP will remain flat over the BOC's projection horizon.

- While job growth is supporting consumption, business inventories have increased sharply and economic data may also be choppy because of recent flooding and wildfires in parts of Canada.

- Policy makers discussed the flat or inverted yield curves in some markets and whether it's a signal about economic prospects or investor demand for long-term assets.

--MNI Ottawa Bureau; Greg Quinn, 613-314-9647; greg.quinn@marketnews.com

[TOPICS: M$C$$$,MACDS$]

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