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Bank of Canada raises rates as Poloz’s tale of recovery from Great Recession finally starts coming true

Financial Post ~ July 11th, 2018

Kevin Carmichael: Beyond trade, the bigger story in decision is that most companies are responding to their order books rather than headlines in business pages

The Bank of Canada raised interest rates July 11 because Stephen Poloz’s tale about how the economy would recover from the Great Recession finally is coming true.

Most everyone assumed the central bank would lift the benchmark rate a quarter point to 1.50 per cent. The few who didn’t thought policy makers would be spooked by what President Donald Trump has in store for global trade. On the eve of the interest-rate announcement, the U.S. escalated its trade war with China, scheduling tens of billions in additional tariffs.

Canada also is on Trump’s hit list. The central bank now reckons the combination of U.S. duties on Canadian lumber, newsprint, aluminum, and steel — and the chilling effect of trade uncertainty on investment — will subtract two thirds of a per cent from gross domestic product by 2020, an increase from its previous estimate in April.

That’s the equivalent of about $12 billion, so it’s not nothing.

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