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Globe and Mail
17-06-2025
- Business
- Globe and Mail
Bank of Canada summary details council's concerns over trade war in June rate decision
Members of the Bank of Canada governing council were concerned that underlying inflationary pressures led by trade disruption and uncertainty could persist for a long time, minutes of the meeting showed on Tuesday. The central bank held its key benchmark rate at 2.75% on June 4, citing the need to monitor the impact of U.S. tariffs on Canada and on rest of the world and how businesses and consumers adapted to it. Its summary of deliberations showed the members took into consideration the unexpected firmness in inflation data to take its rates decision and that the team spent considerable amount of time probing how trade policy was influencing prices. Former BoC head Poloz says investors should consider hedging against global inflation risk 'Underlying inflationary pressures could persist for an extended period as consumers and businesses adapt to the rewiring of global trade,' the minutes said, even as the members acknowledged there could be downward pressure on prices too. Businesses have been reporting that they would pass on higher costs stemming from trade disruptions, the members noted, adding that surveys showed that even consumers see prices rising. Canada's annual inflation rate fell to 1.7% in April due to some tax removal, but closely tracked core measures of inflation rose above the bank's target range of 1% to 3% in the same month, stoking concerns that inflation was firming up. The governing council excluding impact of taxes, inflation was 2.3%, which was slightly above expectations. The fall in the rate of inflation to below 2% had helped the BoC to cut interest rates aggressively by 225 basis points since June last year, but the uncertainty and subsequent tariffs imposed by President Donald Trump has disrupted the bank's predictions. 'Members agreed that cost increases from trade disruptions may be playing a role in inflation in goods prices, but the direct impact from retaliatory tariffs was not yet evident,' the summary said. The rate-setting team acknowledged that the pass-through of higher input costs to consumer prices would be difficult to track going forward. The governing council will closely track how inflationary pressures are evolving and carefully assess the timing and strength of the downward pressure on inflation from a weaker economy and the upward pressure on inflation from higher costs, the members agreed. The deliberations said if the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate. However, if the economy weakens and cost pressures are contained, there could be a need to cut rates in the future.
Calgary Herald
12-06-2025
- Business
- Calgary Herald
Don't assume further rate cuts from the Bank of Canada, Poloz warns
Former Bank of Canada governor Stephen Poloz warned markets should not be assuming further rate cuts by the central bank, which will remain primarily focused on the inflation risk caused by tariffs over a weakening economy. Article content 'Inflation has been kind of firming lately, using the core measures the Bank of Canada pays attention to,' said Poloz, now special adviser to Osler, Hoskin & Harcourt LLP, during a webinar on Tuesday. 'And the counter tariffs that the government has put in place will start boosting inflation in the next couple of months.' Article content Article content On June 4, the Bank of Canada decided to hold its policy rate for the second straight time at 2.75 per cent, as it assesses how tariffs are affecting the Canadian economy. Article content Bank of Canada governor Tiff Macklem said it was too early to see the impact of retaliatory tariffs on the published CPI data but expects to see those effects in the coming months. The Government of Canada imposed 25 per cent tariffs on almost $60 billion worth of United States goods in response to U.S. tariffs, although certain exemptions apply. Carney has also signalled further potential retaliatory tariffs. Article content Poloz said the central bank had to learn a hard lesson during the post-pandemic era, when inflation unexpectedly jumped higher than expected. At the time, Macklem said inflation would be 'transitory.' Article content Article content 'The central bank said, 'Don't worry, that's a transitory thing.' Well, transitory turned out to be two years,' said Poloz. 'Having learned that lesson the hard way, I think central banks are going to be much more preoccupied with inflation risks.' Article content Article content The Canadian economy grew by 2.2 per cent in the first quarter of this year, mainly as the result of a rise of exports, as businesses pulled forward their inventory to get ahead of U.S. President Donald Trump's tariff announcements. Macklem said he expects growth in the second quarter to be considerably weaker, while many economists are forecasting a recession this year. Article content The unemployment rate also hit seven per cent in May, as tariff uncertainty continued to slow hiring demand and the manufacturing sector showed significant job losses in the last few months. Article content Article content Poloz said the deterioration in the labour market is a 'recessionary indicator' and he expects further layoffs as the result of tariffs in the coming months. This will be a point of concern for the Bank of Canada but Poloz noted that governments have shown a willingness to use fiscal policy to address the economic damage brought on by tariffs, while the central bank can remain focused on price stability.
Yahoo
11-06-2025
- Business
- Yahoo
Don't assume further rate cuts from the Bank of Canada, Poloz warns
Former Bank of Canada governor Stephen Poloz warned markets should not be assuming further rate cuts by the central bank, which will remain primarily focused on the inflation risk caused by tariffs over a weakening economy. 'Inflation has been kind of firming lately, using the core measures the Bank of Canada pays attention to,' said Poloz, now special adviser to Osler, Hoskin & Harcourt LLP, during a webinar on Tuesday. 'And the counter tariffs that the government has put in place will start boosting inflation in the next couple of months.' Canada's inflation rate came in at 1.7 per cent in April, but measures of core inflation came in at three per cent and above. On June 4, the Bank of Canada decided to hold its policy rate for the second straight time at 2.75 per cent, as it assesses how tariffs are affecting the Canadian economy. Bank of Canada governor Tiff Macklem said it was too early to see the impact of retaliatory tariffs on the published CPI data but expects to see those effects in the coming months. The Government of Canada imposed 25 per cent tariffs on almost $60 billion worth of United States goods in response to U.S. tariffs, although certain exemptions apply. Carney has also signalled further potential retaliatory tariffs. Poloz said the central bank had to learn a hard lesson during the post-pandemic era, when inflation unexpectedly jumped higher than expected. At the time, Macklem said inflation would be 'transitory.' 'The central bank said, 'Don't worry, that's a transitory thing.' Well, transitory turned out to be two years,' said Poloz. 'Having learned that lesson the hard way, I think central banks are going to be much more preoccupied with inflation risks.' The Canadian economy grew by 2.2 per cent in the first quarter of this year, mainly as the result of a rise of exports, as businesses pulled forward their inventory to get ahead of U.S. President Donald Trump's tariff announcements. Macklem said he expects growth in the second quarter to be considerably weaker, while many economists are forecasting a recession this year. The unemployment rate also hit seven per cent in May, as tariff uncertainty continued to slow hiring demand and the manufacturing sector showed significant job losses in the last few months. Poloz said the deterioration in the labour market is a 'recessionary indicator' and he expects further layoffs as the result of tariffs in the coming months. This will be a point of concern for the Bank of Canada but Poloz noted that governments have shown a willingness to use fiscal policy to address the economic damage brought on by tariffs, while the central bank can remain focused on price stability. Poloz said whether Canada's central bank cuts or not will depend on what is causing the economy's slowdown. 'If it's just uncertainty that's causing companies to stop, pull back, then maybe cutting rates helps,' he said. But if tariffs are causing a more permanent structural issue in the Canadian economy, then monetary policy could prove ineffective. 'Cutting rates in that context just boosts demand with no supply to meet it, and can actually cause inflation to go up,' said Poloz. 'Markets should not be assuming these things,' he added. 'You saw the ECB (European Central Bank), they cut rates, but Europe has not retaliated on the tariffs, so they have less inflation risk for them, than we do over here.' In the meantime, uncertainty brought by Trump's trade war will continue, with a pullback on investment set to continue. Poloz said global income could drop by as much as $40 trillion due to Trump's tariff regime over the next few years. On the fiscal policy side, Poloz said the Liberal government is 'off to a promising start' with announcements on internal trade, increased defence spending, legislation on big projects and rhetoric on making Canada 'an energy superpower.' Poloz said he is seeing growing optimism in boardrooms, but added that the West remains understandably skeptical. Prime Minister Mark Carney said his government will present a budget in the fall and has promised to change the way its presented, by splitting operating and capital spending into two separate categories, which has faced criticism that it would complicate transparency on the deficit. David Rosenberg: Surprise job gains in Canada conceal economic rot underneath 'Grinding' rise in unemployment rate means Bank of Canada will start cutting rates again 'When someone presents a budget, they don't get to say we're going to do this and that's going to cause the economy to grow enough that actually it won't cause a deficit,' said Poloz. 'Convention is you say what you're going to do, then of course you cross your fingers and hope it works, it makes the economy bigger, and over time the revenues for the government grow and the deficit goes away.' 'But we all know that some of these things are so critical for economic growth, they're guaranteed to pay off,' he added. • Email: jgowling@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
26-03-2025
- Business
- Yahoo
'We're seriously outgunned' in trade war, warns former Bank of Canada governor
Former Bank of Canada governor Stephen Poloz says we are 'seriously outgunned' by the Americans in a trade war, arguing Canada will still need the United States down the road. 'When the dust settles, we will need our U.S. partnership, just as much as we need it today,' said Poloz, now special adviser to Osler, Hoskin & Harcourt LLP, during a webinar recorded on Monday. 'We need to keep our eye on that long-term. This is not the Hatfields and the McCoys. We have to think long-term and make the best of a bad hand at this stage, knowing that there will be another hand in due course sometime in the future.' U.S. President Donald Trump is set to announce reciprocal tariffs on all countries on April 2, and it isn't clear if goods covered by the Canada-U.S.-Mexico Agreement (CUSMA) will remain exempted from tariffs beyond that date. The Bank of Canada estimates a protracted trade war with the U.S. would cause Canada's GDP to decline by three per cent over the next two years. Desjardins Group economists predict Canada's economy will head into a contraction as soon as the second quarter of this year. Poloz said while the forecasts for the Canadian economy are 'grim' he does not believe them to be 'existential.' He said he is optimistic that Canada can find a practical solution. 'People forget that trade doesn't happen between countries, it happens between people,' he said. 'And those people still like each other, still respect each other, still want to do business together.' The trade war with the U.S. is set to dominate the federal election, which kicked off on Sunday, with Conservative Party leader Pierre Poilievre and Liberal Party leader Mark Carney both promising income tax cuts to Canada's lowest earners. Poloz said the trade war will require a fiscal response, though he does not think it will require one at the same scale seen during the pandemic. 'My hope is it will lean on promoting investment, more than we have in other slowdowns, as opposed to just household spending,' he said. Last week, the federal and provincial governments announced their plans to remove internal trade barriers, and have free trade within the country by July 1. Poloz said the gains will be significant for the Canadian economy. Trump says auto tariff coming, teases reciprocal duty breaks Why this is shaping up to be the trade war election How Trump's 'liberation day' could work in Canada's favour Moving forward, Poloz also had a number of suggestions to make Canada's economy more competitive. These include declaring energy and resource projects within the national interest, leaning into technological innovation, creating a better tax system for the manufacturing sector and using revenue from retaliatory tariffs to fund tax cuts. 'We're on the cusp of a major technological revolution. The world is going to change in so many different ways, more of the trade will be in services, not in goods,' said Poloz. 'There are just so many other things changing in a positive way. What we need to do is get ourselves in a position to take advantage of it all, and we can.' • Email: jgowling@ Sign in to access your portfolio
Yahoo
07-02-2025
- Business
- Yahoo
Terence Corcoran: Two weeks of Trumpism shouldn't overturn a century of Canada-U.S. links
From food shoppers in supermarkets to the upper echelons of economic and political power, the transformation of Canada into an anti-American nation appears to be underway. In Toronto today, the Canada-United States Economic Summit will explore turning the Canadian economy away from the U.S. Some love the prospect. The idea of a national boycott of all things 'Made in the USA' is turning into a 'Made in Heaven' opportunity to launch a 'Made in Canada' buying crusade. News stories, consumer interviews and buying guides have permeated the media in recent days, latching on to a growing anti-American sentiment among average Canadians. One news headline declared a 'patriotic wave' among Canadian consumers against everything American, from produce to automobiles and vacation travel. The patriotic wave is totally anti-Trump rather than anti-American, since it is more than likely that Canadians still want to travel to Florida and California and buy U.S. wines and oranges. For Canadians, the United States has long been a giant province to the south with shared culture and broadly individualistic political norms. With a U.S. president who thrives on polarities and political confrontation, it is not surprising that Canadian individuals feel slighted and want to react, but the question is whether it makes any economic sense to adopt politically driven personal shopping motivations. Political shopping sacrifices the standard objectives of maximizing personal satisfaction — in taste, style, need, want and price — in favour of abstract and incoherent political concepts that have no value and may ultimately have detrimental economic consequences. The same considerations apply to business and corporate decisions. The Trump tariff war is prompting a wave of calls for nationalist policy-making, even before we actually know how the tariff process will end. At the Canada-U.S. Economic Summit today, and across the commentary world, Canadians are being told to turn away from the U.S. and look elsewhere for markets. Former Bank of Canada governor Stephen Poloz told BNN Bloomberg that the federal government needs to direct more resources at companies. 'What I'm talking about is incentivizing investment,' said Poloz. According to BNN Bloomberg, Poloz said policy-makers should be placing a big emphasis on encouraging investment in Canada to create a stronger and more resilient economy that can better withstand external shocks like the Trump trade war. Policy weaknesses are obvious regardless of Trump. Interprovincial trade barriers and the agriculture supply-management regime need reform, although these are policies that could and should have been reformed decades ago. Most intervention proposals, however, call for a shift away from the U.S. economy. But as William Watson noted in FP Comment the other day, refocusing the Canadian economy — they call it 'trade diversification' — is a long shot. Such diversification, Watson concluded, is 'a poor substitute for tariff-free access to a market of 500 million people, including many of the world's richest people.' The most talked about diversification option is to expand alternative pipeline and shipping projects for Canada's vast storehouse of fossil fuels. A leading candidate for the job is said to be the Energy East pipeline, a project first proposed by TransCanada Pipelines more than a decade ago. Within days of Trump's tariff attack, calls for a revival of the Energy East pipeline emerged. Investment executive Eric Nuttall called for 'a pipeline to the East Coast to supply Canadian refineries with domestic feedstock, while also more affordably accessing other markets.' Another op-ed this week said it is 'imperative we recover our nation-building muscle memory and expedite east-west infrastructure and offshore export facilities.' The original Energy East plan was promoted by TransCanada as a modern replay of the historic national railway projects, and by the federal Conservative government as part of a strategy to make Canada an 'energy superpower.' The pipeline would have crossed 4,600 kilometres of Canadian territory from Alberta to Quebec and the Maritimes. Then it all started to fall apart. Energy East was killed in 2017 by TransCanada for many reasons, including opposition from Indigenous communities, environmentalists, Quebec politicians and local towns and villages, and regulatory squabbles. Reliance on tariffs shows Canadians outsmarted Americans Please, no ministries of trade diversification Where do we go from here in the Trump tariff drama? While all these obstacles were real, the most important one was the price of oil. When TransCanada announced Energy East in 2013, oil had risen to US$110 a barrel — a price many predicted would be the new normal. TransCanada dropped Energy East in 2017 after the price of oil had fallen to US$50 a barrel. Measured in today's dollars, the U.S. price of oil in 2013 was equal to US$150 a barrel today. The market price of oil today is US$70, indicating a more than 50 per cent decline in potential revenue. Meanwhile, the cost of building Energy East today would be much higher than the $15-billion estimate set in 2013. Some say Canada's links to the U.S. are done, finished, and should be abandoned: 'There is no returning.' But it makes no sense economically or politically to abandon more than a century of history after just two weeks with an unpredictable U.S. president. • Email: tcorcoran@ Sign in to access your portfolio
