The Bank of Canada on Wednesday will announce its latest interest-rate decision. Prediction: It will leave its benchmark lending target unchanged. Canada’s economy is far from healthy. But Governor Stephen Poloz said data would guide his decisions, and the indicators he follows most closely are perking up. Economic leaders over the weekend also sent a signal that monetary policy is reaching its limits. Canada’s central bank will cut borrowing costs if necessary, but the case to do so will have to be stronger than it is today.
Let’s start with the weekend. Poloz and Finance Minister Joe Oliver met their counterparts from the Group of 20 economic powers in Ankara, Turkey. Much was made of the G20’s written pledge to “refrain” from currency devaluations. But the G20 also laid the groundwork for a return to higher interest rates. The official statement conceded that “monetary policy alone cannot lead to balanced growth,” an overdue admission on the part of finance ministers that they have been leaning on their central bankers for too long. The G20 added that the long-awaited shift to higher borrowing rates had become “more likely” in some of the richer countries.
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