(October 6 – 17:45 ET) – Jeff
Rubin, chief economist at Canadian
Imperial Bank of Commerce,
says there’s no reason to expect
an independent interest rate
increase in Canada. All our rate
cues are likely to come straight
from the playbook of the U.S.
Federal Reserve Board.
Rubin says the Bank of Canada is
unlikely to raise rates even in the
face of our strong economy and
the spectre of spending increases
and tax cuts from the federal
government.
Typically, investors might
expect the Bank to tighten as
fiscal policy eases, spurring
further growth and the possibility
of inflation. Yet Rubin says that
even big spending increases or
tax cuts aren’t likely to boost
growth that much because they will
be financed on the back of the
consumer one way or another.
He says the real impact of
fiscal easing shows up in the
federal budget balance. He notes
that the shift from deficit to
surplus position has helped
spur the economy to its strong
recent growth. But most of that
effect is now in the economy. It
won’t be spurring accelerated
growth, unless the feds start
running deficits again. That
seems unlikely, given all the
crowing about the surplus.
Rubin believes any interest
rate risk is coming directly from
the U.S. Fed.
-IE Staff
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