FXStreet reports that Warren Lovely and Taylor Schleich from the National Bank of Canada offer up some high-level commentary on how certain conditions evolved under Poloz’s watch, with an eye towards the situation the new guy, Tiff Macklem, inherits next week.
“Judged solely on his ability to keep inflation inside the mandated 1-3% target band, give Poloz his due. Before he took over, all items inflation had been relatively muted, falling shy of 1% in five of the seven months leading up to Jun-2013. But inflation fell in line under Poloz; over his seven-year run, headline inflation rarely broke out of the 1-3% target band. [...] Recent BoC speak has acknowledged downside inflation risks, and look for this issue to be taken up in next week’s rate statement, the first of the Macklem regime.”
“Poloz goes out a net loser on jobs and growth, not that it’s his fault. From Jun-2013 to Feb-2020, 1.5 million net new jobs were created in Canada (average annualized growth of 1.2%), with the unemployment rate hovering at 5½% early in the year. But March and April bloodletting have (at least temporarily) wiped out a combined 3 million jobs, driving joblessness to 13%.”
“As for GDP growth, it’s been somewhat choppy, including a mid-mandate wobble linked to 2015’s oil-price collapse followed by a 2017 resurgence. [...] The peak-to-trough destruction of Canadian output could be around 20%, turning the GDP clock back a decade. Even with wholesale capacity destruction, it could take one half or more of Macklem’s seven-year term to close the output gap opened up by the virus, assuming no second wave or other serious setbacks.”
“When Poloz took over from Carney, the BoC’s policy interest rate was 1%. That seemed low at the time but looks downright juicy vs. today’s 0.25% rate setting. Poloz became the second straight governor to explore the lower effective bound for the policy interest rate and hands a GoC yield curve to Mr. Macklem that belongs in the twilight zone relative to prior leadership transitions. Let’s assume the incoming governor would prefer to avoid negative interest rates in the same way Jay Powell’s Fed is trying to sidestep the negative rate rabbit hole.”
“BoC balance sheet: When Poloz arrived, BoC assets amounted to C$88 billion or less than 5% of GDP. As of last week, assets had ballooned five-fold to C$442 billion. Based on established purchase programs, BoC assets may be en route to ~30% of GDP or more. It’s for Macklem to determine by how much and for how long the BoC’s balance sheet is needed to spur economic recovery.”
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2020 TeleTrade-DJ International Consulting Ltd
TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.