CAD: Stimulus needed, but what kind will it be? – Nomura
By FXStreet FXStreet (Delhi) – Charles St-Arnaud, Research Analyst at Nomura, suggests that while investment is likely to remain a drag for Canadian economy while fiscal stimulus is awaited, which increases the possibility of a cut.
Key Quotes
“Recent growth indicators show that the Canadian economy is underperforming significantly, with growth likely to have been flat or even negative in the fourth quarter of 2015. Looking at the details by industry, we find that about 75% of the moderation in growth since December 2014 can be attributed to the adjustment to lower commodity prices and to the reduction in business investment.”
“We believe that business investment is likely to remain weak in 2016 and remain a drag on growth given the further decline in commodity prices in recent months, continued uncertainty regarding the global economy and the increase in the cost of capital goods coming from the sharp CAD depreciation. With growth faltering and likely to remain weaker than expected by the BoC, the probability of a rate cut has increased.”
“Moreover, after almost two months in power, the announcement of the size and details of the fiscal stimulus by the new federal government are still being awaited and one could start to wonder if the …read more
Source:: FX Street
