By Josh Hall (Twitter: @Vancan19)

Bank of Canada official says US trade policy a threat to national economy

Jun 5, 2018 | 12:17 PM

American trade policy is of serious concern to the Canadian and Albertan economies, according to a senior official with The Bank of Canada.

Deputy Governor Lawrence Schembri spoke with rdnewsNOW Tuesday after visiting with members of the Red Deer and District Chamber of Commerce.

Schembri says while the economic outlook is positive and Canada is operating close to its potential at the moment, NAFTA negotiations could derail some of the good progress made to date.

“It’s affecting people’s decisions about investment and their export behaviour,” he explains. “We’ve seen many firms tell us they’re waiting until the NAFTA renegotiations are resolved before making investment plans, so their investment is being delayed and that’s weighing on growth in Canada. It’s also limiting their ability to continue to produce exports for sale abroad.”

The Bank of Canada’s mandate is to set the interest rates for the entire country. It was announced at the end of last month the interest rate would be holding at 1.25 per cent for now.

Byelection April 22, 2024

Advance voting for Red Deer's byelection runs April 18-20

12h ago

family physician

New doctor working at Easthill clinic in Red Deer

12h ago

april 13

RCMP charge Innisfail resident following traffic stop

13h ago

“We’ve seen positive growth – broad-base growth across the country,” he continues. “Alberta has grown relatively quickly over the past year. We expect it to grow into the future and we see that in other parts of the country as well.”

Schembri adds the approval of the Trans Mountain Pipeline expansion and the fact it’s likely to be built very soon will also have indirect positive effects on things.

“Transportation bottlenecks were affecting investment decisions in the oil and gas industry and now with higher probability of the pipeline being built, it will encourage more investment in the oil and gas sector,” he says. “It is just one pipeline, so it’s unlikely it’ll have an immediate impact on any interest rate decision, but generally speaking, it’ll extend the productive capacity of our economy.”

Reg Warkentin, Policy and Advocacy Manager with the Red Deer and District Chamber of Commerce says it’s truly a balancing game between trying to incentivize economic growth by maintaining low interest rates, while also preventing too much inflation.

“The interest rate is in an okay spot, but I think the consensus in the room is that increased interest rates will become an issue and really start constraining economic growth, especially in the housing and construction industry,” he says. “There is a huge array of challenges facing business right now, whether it’s NAFTA, geopolitical risk, or competition against the United States with all their tax reform and increased energy independence.”

Warkentin says The Bank of Canada has a tough role to play because with so many levers at play and a richly diverse national economy from province to province, they still must come up with one interest rate that works for everyone.

“The really important part for us is the economy growing,” he goes on. “There’s recognition that we’re in a really fragile state of the economy, where generally speaking, the indicators are trending positive. But, we’re seeing some hesitation to really invest, for businesses to increase their hiring and invest in new projects.”