But Wednesday’s decision by the Federal Reserve to lower its own funds rate also possibly gave the Bank some breathing space on cuts, even if the Canadian central bank has already shown itself comfortable in diverging from the Fed.
“The Bank has shown in recent years that it’s not going to doggedly follow the Fed step by step. They actually got well ahead of the Fed on the way down here,” Porter said. “So they’re not necessarily going to be dictated by what the Fed does. But I would say there are two reasons why the Fed easing makes their job easier.
“The first is, if the Fed is actually responding to what it believes is a weaker growth backdrop and a milder inflation backdrop, then the Bank of Canada would be responding to more or less the same signals. But second of all, with the Fed easing, it does take some more of the potential downward pressure off the Canadian dollar than if the Bank was going it alone.”
Is the tariff outlook brightening?
Macklem said on Wednesday the Bank was paying close attention to developments in the trade war with the US, which saw a de-escalation of sorts in recent weeks as the Canadian government scrapped some of its counter-tariffs on US imports.
Porter said there’s reason for cautious optimism on the trade outlook. “More broadly, we’ve had a little less noise on that front globally with the deals that the [US] administration has hammered out with some countries. That has given us some stability,” he said.