BOC Schrembri: NAFTA uncertainty is impacting business investment

Lawrence Schembri, Deputy Governor of the Bank of Canada, has been taking questions in a Q&A and has said NAFTA uncertainty is weighing on business investment while the economy has added capacity and that there is not enough evidence to move neutral interest rate - that is dovish. 

However, USD/CAD is now trading below the 100-hr SMA located at 1.2803. At the start of the US session, USD/CAD was trading at 1.2869 - (renewed dollar selling at play at critical levels of a short-term correction in medium-term bear trend; US protectionism/soft dollar policy a thorn in the greenback's side). Also, keep an eye on Trans Mountain pipeline headlines. Boosting the CAD, Finance Minister Bill Morneau said today:

"We are willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated." 

Lawrence Schembr Q&Ai:

  • Lacking evidence to move neutral interest rate
  • Rates are below neutral due to NAFTA uncertainty
  • Equilibrium neutral rate in Canada determined by global forces
  • BoC recognizes that low rates create financial vulnerabilities
  • capacity is being hindered by firm's reluctance to take on investment in face of uncertainty

About Lawrence Schembri:

Lawrence Schembri was appointed Deputy Governor of the Bank of Canada in 2013, serving as one of two deputy governors responsible for overseeing the Bank’s analysis and activities to promote a stable and efficient financial system. In 2016, he became responsible for overseeing the Bank’s analysis of domestic economic developments.

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