(August 10 – 11:10 ET) – The Bank of Canada has released extracts from the minutes of its meetin on June 15, hinting that it will continue to shadow the U.S. Federal Reserve Board.
Senior Deputy Governor Malcolm Knight said that the external economic backdrop for Canada remained positive, with continued strong demand in the U.S., strong gains in Europe, recovery in Mexico, Brazil and the Pacific Rim. Commodity prices remain supportive. He confirmed the bank’s opinion that things are slowing in the U.S., although it is still outrunning capacity. “With ongoing strains on capacity, underlying inflation in the United States had edged up in recent months and wage pressures had become more evident.”
On the heels of this rosy picture, Canada continues to outperform and can expect “sustained healthy growth through the remainder of the year”. Knight noted that inflation appears to remain contained. The minutes record his comments. “This suggested that there might be some additional room to explore where the limits of that capacity were. Knight observed, however, that, going forward, the bank must ensure a balance of demand and supply in the economy in order to avoid a flare-up of inflation that would bring economic growth, and gains in productivity, to an abrupt end.”
Knight observed that the loonie had weakened on perceptions that the bank may not follow future Fed rate hikes. “However, the Canadian dollar had subsequently strengthened appreciably, since the latest data, pointing to a slowing in U.S. economic activity and strong growth in Canada, had evidently reduced the possibility of a widening interest rate differential between the two countries.”
The bank’s next meeting is scheduled for September 15.
-IE Staff