- The Bank of Canada needs to set policy that minimizes the risk of errors; that means being less forward-looking than normal.
- That may also mean acting quickly when things crystallize; we need to be flexible and adaptable.
- Given the high degree of uncertainty about the base case, our focus is less on the best monetary policy for a specific economic outlook.
- Reiterates that there can be no doubt about the Bank’s commitment to low inflation.
- Monetary policy must prevent initial direct price increases from spreading; we need to make sure a tariff problem doesn’t become an inflation problem.
- The more inflationary the impact of tariffs, the more monetary policy needs to focus on anchoring inflation expectations.
- There remain too many unknowns about tariffs to predict what happens next.
- The Canadian economy managed a soft landing; unfortunately, we’re not going to stay on the tarmac for long.
- U.S. tariffs could put downward pressure on Canadian energy prices and reduce profitability for producers.
- There can be no question about our sovereignty or our border.
This article was written by Greg Michalowski at www.forexlive.com.