The market reaction to yesterday’s Bank of Canada announcement certainly makes it clear that the tones of optimism found in the report amount to a little more than a head fake.
With the Canadian dollar lower by half a cent this morning, the take-away is certainly centered on Governor Stephen Poloz and the possibility that the bank would again – for the first time since July 2015 – cut interest rates.
The question has got to be what has changed for the Canadian economy in a little over a year? And there’s only now one thing that stands out, which is that the Federal and B.C. have assumed the responsibility on household imbalances and attempting to maintain some stability in select housing markets.
Ultimately, this has to have those watching the bank of Canada to anticipate a reactive approach to interest rate policy and increase the likelihood for an interest rate cut should the Canadian economy continue at a mediocre pace nationally.