BMO Capital Markets: Canadian Fiscal and Monetary Policies May Be Pulling in Opposite Directions

According to Jin10, BMO Capital Markets Chief Economist Douglas Porter said in a report published over the weekend that Canada's fiscal and monetary policies may be working in opposite directions. Porter said the Canadian government's annual budget plan was more substantial than expected and provided significant fiscal stimulus. BMO Capital Markets raised its forecast for Canada's 2027 GDP growth from 1.8% to 2%. Meanwhile, the Bank of Canada raised interest rates in response to higher inflation expectations and could raise them further. Porter said, “If that does not count as policies moving in contradictory directions, it is hard to imagine what would.” He added that weak employment data, falling oil prices and a selloff in technology stocks could prompt Bank of Canada policymakers to reassess whether another rate hike in December is necessary.