Article content continued

Indeed, economists expect the U.S. Federal Reserve will next week hike rates south of the border.

Will that U.S. growth rub off on Canada? Douglas Porter, chief economist for BMO Financial Group, doesn’t think so. He said the Bank of Canada’s statement on Wednesday is “studiously cautious” in its outlook. The bank countered every positive observation with a negative observation — it was as if the bank was saying “yes, but …” in response to each piece of good news, Porter explained.

“We would interpret the series of relatively downbeat statements as a stark reminder that Canadian short-term rates in no way, shape or form, will follow the U.S. lead higher. Barring some massive shock, the Bank appears to be very comfortable staying on the sidelines for some time yet,” Porter said.

While unemployment seems low at 6.8 per cent, most of the recent job gains have been in part-time employment. And while Canada’s economy grew a tad bit better than expected during the third quarter, the bank seems to be waiting for a weaker Canadian dollar to boost exports Porter said.

A potential frustration for the bank is that global bond yields have risen, apparently in expectation of U.S. fiscal expansion. Canadian banks have been raising their prime lending rates in response. The Bank of Canada noted that Canadian yields have “risen significantly,” but offered no further comments on what this means for Canada.

Dawn Desjardins, deputy chief economist with RBC, said her bank assumes the U.S. economy will grow at a firmer pace in 2017. RBC also expects any changes to U.S. trade policy — an expected hallmark of president-elect Donald Trump’s incoming administration — to be slow moving, if they happen at all. “For Canada, this is likely to translate into a firmer year for growth in 2017 and will likely result in the Bank maintaining the overnight rate at 0.5 per cent throughout the year.”

The bank’s next policy statement is due Jan. 18. The bank will publish a full update of its outlook for the economy and inflation at that time.

“We continue to expect the BoC to be on hold for most of 2017, but the probability of a cut remains non-trivial, especially if non-energy exports continue to underperform and momentum in the domestic economy remains weak,” write Charles St-Arnaud and David Wagner of Nomura Global Economics.

dhasselback@nationalpost.com

twitter.com/vonhasselbach