Bank of Canada may start revealing its view of federal budget’s impact on policy, economy

OTTAWA – It’s the Bank of Canada’s turn to weigh in on the country’s economy.

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Monetary policy officials have remained on the sidelines because the election in October of a new authorities – one that campaigned on the need for fiscal muscle to lift the economy and obtain more Canadians working.

Last week’s Liberal budget offered tens of billions of dollars a year in stimulus spending – and deficits – before the next national vote four years down the road.

The Bank of Canada presently has Ottawa’s economic forecasts and stimulus plans at hand, and governor Stephen Poloz and the policy counsel are beginning to include them into their own domestic outlook and how which will translate into the central bank’s next interest rates decision April 13.

But the very first steps forward will come this week, and among Poloz’s deputies delivering a midweek speech in Edmonton, followed by key surveys of Canadian business leaders on views from the economy and their plans throughout the 2016.

“We’ll be listening closely (towards the speech) for the bank’s thoughts on last week’s federal budget and how that may shape their growth outlook,” said Benjamin Reitzes, senior economist at BMO Capital Markets.”

“The BoC’s growth forecast will certainly be revised higher, (but) just how much is the question.”

Poloz continues to be holding his cards close to his chest well before Justin Trudeau was elected prime minister within the Oct. 16 national election, ousting Stephen Harper’s Conservatives, and even after the bank’s March 9 “no-change” rate of interest announcement – waiting, instead, for information on spending in the March 22 budget.  

There will likely be some initial indication from the bank’s view of the budget on Wednesday, when deputy governor Lynn Patterson speaks to the Chamber of Commerce of Edmonton on the subject, “Adapting to the Fall in Commodity Prices: One Step at any given time.” She will also take questions from the audience, that could provide an opportunity for unscripted remarks on the economy. 

The Bank of Canada’s first response to the power plunge came more than a year ago. With the floor receding of worldwide oil prices, Poloz delivered some shock treatment by means of a January 2015 25-basis-point rate cut – the first move on lending rates since September 2010 – followed by another cut of an equal amount in July this past year, taking the trendsetting policy rate to the present degree of 0.5 per cent.

By then, however, the country had already experienced a two-quarter technical recession.

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The Liberal Party was handed a nominal surplus in the Conservatives of $1.9 billion for fiscal 2014-15. The Trudeau government has set the country on target for any go back to shortfalls, by having an expected $5.4-billion deficit in 2015-16 and rising to $29.4 billion within the following fiscal year prior to the red ink is forecast to shrink to $14.3 billion by 2020-21.



The central bank doesn’t come in a rush to adjust its key lending level, given still-weak oil prices and accepting – for the time being – a softer-for-longer dollar, with the economy struggling to return right into a sustainable growth pattern.       

The U.S. economy has provided mostly of the glimmers of expect stronger growth in america, which greatly depends on its largest trading partner for export dollars.

On Tuesday, U.S. Federal Reserve chairperson Janet Yellen delivers a speech towards the Economic Club of New York. She will also take questions from economists following her prepared remarks – of particular interest will be any indication the Fed will keep its interest-rate path to two hikes this season, instead of four as original planned, on initial signs that U.S. growth slowed within the fourth quarter of 2015.

“The Fed’s actions also matter to the BoC,” said Derek Holt, vice-president of Scotiabank Economics. “The BoC probably wouldn’t wish to add a renewed easing bias if it thought the Fed was going to remain in hike mode this season.”

This week will even see U.S. employment data for March, to be sold on Friday, within 24 hours because the Bank of Canada publishes its quarterly Business Outlook Survey of senior business managers and its Senior Loan Officer Survey of  business-lending practices.

gisfeld@nationalpost.com

Twitter.com/gisfeld