Canadian and U.S. economies are converging but danger lurks: Don Pittis

Bank of Canada senior deputy governor Carolyn Wilkins and governor Stephen Poloz say rather than diverging, the Canadian and U.S. economies are growing closer. (Adrian Wyld/The Canadian Press)

There is no doubt that the Canadian and American economies are converging, even so, the danger persists and lurks.

It should be noted that, at first glance, the governor of the Bank of Canada, Stephen Poloz, and his deputy Carolyn Wilkins had excellent news about the Canadian economy in the Monetary Policy Report. Even so, they warn that markets overestimate the power of a rapid rate reduction solution

In this way, we could mention the fall in mortgage rates, the continued solidity in employment and the increase in business investment that have driven the economic growth rates of Canada in the first half of the year higher than anyone expected.

Still, it is necessary to emphasize that threats to global trade persist, with Canada’s leading central bankers warning that many people who should know better, including stock market investors, seem to think that cuts in interest rates can solve all the problems.

Without a simple answer

Clearly, we are in a complex world divided by commercial disputes, so, there are simply limits to the power of central bankers to fix things. The warnings, which include indications of the possibility of a new attack of stagflation, were effectively a message that rate cuts are not an easy answer to the damaging effect of a global trade war.

Also, it is important to say that at the end of last year, there were signs that companies were moving away from new Canadian investments due to fears that a new NAFTA would not be resolved. Even when that fear faded, US steel and aluminum tariffs. UU And the threats from the president of the United States. UU Donald Trump against Mexico for immigration left a persistent sense of caution.

Even so, while business confidence and a partial return to strength in the oil and housing markets are clear factors, central bankers say the continued strength in new hires is a bit more mysterious.

Read more.

Source: CBC News