USD/CAD drops 60 pips on the headlines from Wilkins in Saskatchewan
- Protectionism measures create upside risks for inflation, especially when the economy is operating near full capacity
- Certain trade developments can result in complex trade-offs for monetary policy
- Says Canada will continue to take gradual approach, guided by data
- Higher rates will be warranted to achieve inflation target
- Implications of trade environment dominated governing council discussion ahead of yesterday's statement
- There may be more room to growth without causing inflation than we have built into our forecast
- Canadian economy is on solid footing but feeling some headwinds from trade
- Uncertainty over NAFTA is deterring some businesses from investing
- GDP growth will be volatile for rest of 2018 but still averaging around 2%
- Temporary factors will likely weigh on Q3 GDP but does not point to underlying momentum
- Full text
The BOC "discussed whether the gradual approach to raising rates that we have been taking over the past year remains appropriate," Wilkins said in the text. "It is a natural question to ask, given that the economy has been operating at potential for the past year and it is in this part of the cycle when interest rates typically rise to pre-empt a buildup in inflation pressures."
I think the headlines might be overplaying the story a bit here. 'Debate' is a strong word and she uses 'discussed' and she doesn't dwell on it. Bloomberg is running with this headline but Reuters doesn't even have it.
Ultimately, I think this is the right direction for the Canadian dollar but this is a bit much for this story.
