“Be prepared for volatility” says BoC governor
Investors should prepare for volatility in 2019 with the impact of lower oil prices and the ongoing trade dispute between the US and Canada.
That’s what Bank of Canada governor Stephen Poloz said Monday, while sounding a generally positive note in an interview with CTV’s Lisa LaFlamme.
Mr Poloz said that the Canadian economy will start 2019 in “a pretty good place” but added that there are risks from the current wave of global volatility.
Inflation and employment figures in Canada are looking good he said, and the fundamentals of the economy are better than they were two or three years ago.
Recession ahead?
The governor does not expect a recession in 2019 but he warned of the risk of rising inflation coupled with economic slowdown.
This combination, as seen in the 1970s, is a “bad prospect” he said because there are no macroeconomic tools to fix it.
Mr Poloz said that the oil price shock is unlikely to be as bad as it was in 2014/15 when the overall slump from $150 to $30 hit Alberta’s economy hard. This time, he says, the province has the tools to cope.
His optimism extended to the trade dispute between the US and China too; noting that there have been some signs of thawing recently and highlighting that many expected NAFTA negotiations to fail.
Interest rates
The governor did not confirm whether there would be a further interest rate rise in January but did tell LaFlamme that households should continue to ‘stress test’ themselves to ensure that any large financial commitments, such as mortgages, can be managed under any change of circumstances.
