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If you were to give Bank of Canada (BoC) Governor Poloz a heavy dose of truth serum, he would readily admit that the Loonie is our policy maker’s best tool for stimulating the right kind of economic growth for our country.
Consider that the BoC has repeatedly said that any sustainable Canadian economic recovery must be underpinned by a rise in export demand that fuels increased business investment in productivity enhancements and expansion. What better way to stimulate our export manufacturers than to help nudge the Loonie lower with some dovish comments at just the right time?
Put another way, why drop the overnight rate further and make borrowing cheaper for everyone, including consumers who have already borrowed to record levels, if you can talk the Loonie down instead, and in so doing, create an economic tailwind that specifically benefits the very part of the economy, export manufacturing, that is so important to our country’s long-term success? When you compare it to the radical forms of quantitative easing (QE) that many of the developed world’s other central banks have resorted to in order to stimulate their economies, talking down your currency seems a lot less risky.