Poloz Backs Trudeau, Says Deficits Give Canada 'Better Mix'
Bank of Canada Governor Stephen Poloz is giving Prime Minister Justin Trudeau’s fiscal policy a ringing endorsement, saying the government’s debut budget will help drive growth.
The central bank held its key lending rate steady at 0.5 percent Wednesday on the strength of a “notable” impact of the March 22 fiscal plan, which included C$118.6 billion ($92.5 billion) in deficits over six years. Without that boost, Poloz said the bank would probably have leaned toward another rate cut.
“I think people take some reassurance that we’ve got a better mix of policies today than we would have without that fiscal change,” the governor told reporters in Ottawa.
The Bank of Canada nonetheless downgraded its growth forecast for 2017 and warned of looming headwinds. While Poloz said Trudeau’s fiscal measures “more than offset the negatives from the other three changes,” pessimism endures.
“We have to wonder where other growth is going to come from,” David Watt, chief economist at HSBC Bank Canada, said in an interview. “It can’t all be from government spending.”
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