Economy making progress, but risks remain, BoC deputy governor says

VANCOUVER – The Canadian economy has made good progress since the plunge in oil prices in 2014, but slack and risks remain, a deputy governor of the Bank of Canada said Tuesday.

Lawrence Schembri said recent economic data has been “largely consistent” with the central bank’s outlook for a gradual strengthening in the global economy.

“However, uncertainty remains elevated because of prospective policies that put at risk the progress made in recent decades to liberalize trade and foster economic integration,” he said in a prepared text of the speech to the Greater Vancouver Board of Trade.

President Donald Trump won the U.S. election with a campaign that denounced free trade deals and called for a border tax, while Britain is set to begin negotiations later this month to leave the European Union.

In its most recent monetary policy report, the Bank of Canada warned about the possible consequences for the economy depending on changes to U.S. trade policy.

Schembri said Canada has resisted the protectionist tilt, noting the recent free trade agreement with Europe.

He said such measures as well as changes to immigration policy are positive steps that will help economic growth.

The drop in oil and other commodity prices in 2014 altered the paths of business investment in Canada and the U.S., Schembri said, noting that the countries are now at different points in the business cycle.

The U.S. Federal Reserve raised its benchmark interest rate for the second time in three months last week and forecast two additional hikes this year. The Bank of Canada’s key interest rate has been fixed at 0.5 per cent since July 2015 and there is little expectation the bank will raise it soon.

Schembri’s speech follows a recent string of better-than-expected economic data in Canada.

Retail, wholesale and manufacturing sales have all come in stronger than expected as well as international trade and job creation.