Fidelity's Wolf Says Case for More Rate Cuts in Canada 'Unclear'

  • Trudeau's stimulus plan takes pressure off Bank of Canada
  • Interest rates in the U.S. will pull away from Canada's

The new Liberal government’s plan to provide stimulus spending takes pressure off the Bank of Canada to cut interest rates again with economic growth still struggling, according to David Wolf of Fidelity Investments.

"The Canadian economy is not in great shape," Wolf, who oversees C$50 billion ($38 billion), said in an interview Wednesday with Pamela Ritchie on Bloomberg TV Canada. "But it’s not clear additional stimulus is going to come in the near term from the bank."

Wolf’s prediction in May that the central bank wasn’t done cutting interest rates was followed two months later by the Bank of Canada’s second interest-rate cut this year to deal with a collapse in the price of oil which threw economic growth into reverse.

Since then Justin Trudeau’s Liberals were swept into power promising to stimulate the economy with C$25 billion in deficits over three years for infrastructure spending.

While Wolf said growth in the second half of the year will rebound from the contraction in the first half, the economy still faces the challenge of low oil prices and slow global growth. That will keep Canadian interest rates low, even as faster growth brings higher interest rates in the U.S., he said.

"Now what we may be seeing is the Bank of Canada on hold and the Fed raising rates," the portfolio manager said in Toronto. "Either way you get the kind of differential that suggests the U.S. is in a better spot, and the U.S. dollar obviously gets a bit of a bid from that."

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