THINK OUTSIDE THE BOX: Many economists believe it would a low-risk stance for the Bank to wait until October before making any move due to the uncertainty surrounding NAFTA and the continuing worries about the debt load being carried by Canadians.

There are more interest rate hikes coming. Bank of Canada Governor Stephen Poloz remained on message during the annual meeting of central bankers in Jackson Hole, Wyoming over the weekend. Of course, the questions that also remain are: How many and when?

Poloz has been consistent in his message that the Bank will make its decisions based on data, and will move gradually. He maintained that stance in Wyoming. Poloz discounted inflation pressures, saying July’s jump to 3% was not unexpected and was caused by “transitory factors” such as higher energy prices and mandatory minimum wage increases. He says the Bank’s reading of core inflation remains near its 2% target.

The Bank of Canada Governor did highlight a key concern that will have to be taken into account as further rate increases are considered – uncertainty about NAFTA. Poloz says the nature and pace of the re-negotiations and ongoing threats, out of the White House, to tear up the deal have put a drag on investment in Canada.

The uncertainty surrounding NAFTA and the continuing worries about the debt load being carried by Canadians mean the central bank may not be able to respond to a rate increase by the U.S. Federal Reserve that is expected in September. Many economists believe it would a low-risk stance for the Bank the wait until October before making any move.

First National Financial LP August 27, 2018