Canada and the United States may be neighbours geographically, yet from an economic and monetary policy perspective, the gulf between the two countries is widening once again.
Canada now has the best performing economy among industrialized actions, according to the International Monetary Fund. This country is, says the economic development watchdog, also ahead of the curve in tightening interest rates — even as our American cousins look to be staying the course for a little longer.
Not long ago, the opposite was true.
At the start of 2016, the U.S. had already begun unwinding its near-zero rate regime and set a course for a handful of incremental increases in borrowing costs. At the same time, other major central banks — including in Canada and Europe — were cutting interest rates.
During an Ottawa speech in January of that same year, Bank of Canada Governor Stephen Poloz stressed it was "important that we understand the reasons for these policy divergences.
"On one level, they simply reflect actions taken by central banks tailored to their own economies. But the underlying forces acting on the global economy are powerful, slow moving and affect various economies differently. This means that the theme of divergence — both financial and economic — is likely to remain with us for some time to come.”
The IMF, in its updated forecast last week, said it sees the Canadian economy expanding by 2.5% this year, up 0.6 percentage points from the agency’s April outlook, while output next year is anticipated to be just shy of two per cent.
Growth projections for the United States, meanwhile, "are lower than in April, primarily reflecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated,” the IMF said. Output has been revised down from 2.3% to 2.1% in 2017, and from 2.5% to 2.1% in 2018.
On Friday, the latest monthly data showed Canada’s economy still gaining momentum. Statistics Canada reported a consensus-beating 0.6% increase in May, following a reading of 0.2% a month
