This morning on BNN, Ed spoke with BNN’s Andrew Bell about today’s Bank of Canada’s statement and the current outlook of the Canadian Economy. Ed stated that the BoC has revised growth and inflation projections seem unpleasant for the economy, but stressed that everything is relative right now as the economy digs itself out of the hole created by the COVID-19 pandemic.
Ed continued by saying that he believes Canadian interest rates will become higher than US interest rates, and that the value of the Canadian dollar has gone up due to Canada becoming a more attractive place to invest. He also said that having a flexible exchange rate serves as a good “check and balance” for the BoC. Finally, Ed concluded with his thoughts on the inflation rate, stating that while they are a concern, he does not think that they are a big worry at the moment.
Ed expressed concern that the BoC might struggle to hit interest rate targets if supply shocks begin to look more permanent. He mentioned 4 factors to watch out for in regards to supply: the future effects of the COVID-19 pandemic; energy and shift towards environmentally friendly alternatives; trade wars; and the potential for bloated government programs crowding out the private sector.
Ed also stated that he does not believe that Canadian interest rate structure will not decisively move higher than those of the US, with the possible exception of the 2-year bonds. Finally, he expressed confidence that Tiff Macklem has learned from the mistakes of the past, and suggested that we should not expect significantly higher interest rates over the next two years.