Same Difference

The Week Ahead

September 11, 2017

You take the high road and I’ll take the low road. We know the destination, but we can’t be too sure of which route the Bank of Canada will take to get there. Nudging interest rates a quarter point higher is clearly warranted after a scorching first half. We don’t need rates this low to generate decent growth, and can ameliorate future financial system risks by easing household credit demand.

But a further climb in the Canada dollar is much less welcome. The central bank wants to shrink the slice of the growth pie coming from housing and household debt, while keeping the currency at levels that will sustain exports and related capital spending. It also needs a bit more inflation, rather than the disinflation associated with a stronger exchange rate.

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