Bank of Canada Tracking Fallout From Global Trade Disputes

Canada’s central bank is keeping a close watch on global trade disputes.

That was the message delivered by Bank of Canada Governor Stephen Poloz, who said the central bank is tracking the fallout from global trade disputes to see if the impact extends to industries beyond the manufacturing sector.

The Bank of Canada is looking to see the extent to which weakness from manufacturing may spread to services, employment, consumer spending or housing, said Poloz during a fireside chat that was part of the Vancouver Board of Trade's economic outlook forum.

The U.S. presidential election this year will not solve a plague of uncertainty that has hurt trade and investment around the world, including in Canada, he said, regardless of whether Donald Trump or another candidate is elected.

"The growth rate of the global economy will remain lower than it otherwise would have been ... because you've thrown sand into the wheels of global commerce. It's hard to put your finger on what that's all costing but we know it's a very real cost," said the Governor.

Poloz added that he's closely watching the Canadian labour and housing markets, noting the former's recent weakness is balanced by higher wages, while the latter is being supported by strong immigration numbers and low interest rates.

In a news conference after the event, Poloz played down recent disappointments in economic growth and consumption statistics and said there aren't compelling reasons to change his outlook for Canada.

"Inflation for almost two years now has been very close to 2% and the economy has been very close to its capacity," he told reporters. "These are not knife-edge things. You need a persistent period of excess supply or excess demand in order to turn that series into a different trend line. We haven't had anything like that."

The bank is scheduled to make a rate announcement on January 22. The Bank of Canada has kept its key interest rate target on hold at 1.75% for more than a year even as other central banks around the world have moved to cut rates and loosen monetary policy in response to concerns about a weakening global economy.