Trade chill from Trump win may make Bank Of Canada cut interest rates

Analysts have revised their expectation for an interest rate cut following the result of the US presidential election.

Experts were talking of early 2018 for any change in the Bank of Canada rate but now believe that a cut could be required sooner if exports are affected by new White House policies.

The Conference Board of Canada addressed the issue of the North American Free Trade Agreement, which President Trump has previously promised Americans he would renegotiated to get a better deal.

That move could have a significant impact on Canadian exports.

That may be the final straw for Governor Stephen Poloz, who said he almost cut rates last month but held off to see whether government spending measures would boost the economy or if persistently weak exports would pick up.

Under the new scenario, the Bank of Canada can pull the rate trigger. Canada’s export engine is already sputtering. We might see a scenario where Canadian exports take a pretty significant hit.

The odds of a Bank of Canada rate cut in the next six months were about 19 percent as of Tuesday, though that figure didn’t reflect the election results.

Canada sells three-quarters of its exports including automobiles, machinery and lumber products to the U.S.

Weaker exports will lead to weaker growth. That will definitely hit the economy and may make Bank of Canada cut interest rates further.


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