Rosenberg: No question Bank of Canada will follow suit if U.S. Fed cuts rates
If the U.S. Federal Reserve cuts interest rates, the Bank of Canada will follow suit, says David Rosenberg, who also warns that the loonie will surge if it doesn’t.
“My sense is that Poloz seems to be very confident and wants to keep interest rates stable here,” the chief economist and strategist at Gluskin Sheff + Associates told BNN Bloomberg in an interview Wednesday. “But think about what the risks are if the Fed eases, and the Bank of Canada operates policy here in a vacuum and doesn’t follow suit. What ends up happening is the Canadian dollar is going to ratchet higher.”
Rosenberg warned that a higher loonie is “the last thing” Canada’s manufacturers and resource producers need right now, and that the fundamentals don’t support the Canadian dollar heading toward 80 cents US.
Rosenberg said he expects the Fed will decrease rates at least twice this year and that the Bank of Canada would follow with cuts within the next couple of months. That’s despite an optimistic economic tone from Canada’s central bank in its latest interest rate decision, when it left rates steady at 1.75 per cent and pointed to “accumulating evidence” of an economic recovery.
“Canada, I think, may lag the U.S. on cutting rates,” Rosenberg said. “But if the U.S. is cutting rates because of a darker global economic outlook and downward revisions to growth, it’s hard to believe we’re going to escape that.”
“I don’t think the bank’s going to sit on its hands for six-to-12 months and see what happens.”