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Fireside Chat – Stephen S. Poloz, Governor




Good morning, everyone, and happy new year. It is great to be here in Vancouver for the Board of Trade’s Economic Outlook Forum.

This part of the event has been billed as a fireside chat. And, while I am happy to share the Bank of Canada’s observations on the economic outlook, I very much hope that I will get the chance to hear from you—business leaders who are making real decisions with real money every day. At the Bank, a large and talented team uses state-of-the-art economic models and reams of data to forecast economic growth and inflation. But just as important is what we learn from talking to Canadians. So I look forward to hearing about what is on your minds for 2020.

The Bank will announce its next interest rate decision and publish a Monetary Policy Report with updated economic projections in a couple of weeks. To help set the stage for our discussion today, let me set out four key areas that are top of mind for the Bank.

Global trade policy developments

The first is the evolution of global trade policy. This has been a pressing concern for the past three years. The impact of protectionist actions, and uncertainty about what might come next, continues to hold back exports and investment globally.


On the surface, there has been some improvement on this front lately, although it remains to be seen whether this will lead to a recovery of trade and investment. The Canada-United States-Mexico Agreement is close to being ratified, and that will remove one big source of uncertainty for many Canadian companies. And the United States and China have agreed to stop raising tariffs and to roll back some of them.

But a lot of damage has been done; this year, we estimate that global GDP will be around 1 percent lower than it would have been without the trade conflict. This loss will likely be permanent, even if growth resumes from that lower level. Plenty of uncertainty remains around the implications of the US-China agreement for Canadian exports and around whether any more of the new tariffs can be rolled back. Some are concerned that the next step will be for the US administration to take similar trade actions against the European Union. It is understandable that companies are reluctant to make big investments in this setting.

Experience tells us that companies always find ways to cope and innovate in the face of such challenges. We want to know how companies are dealing with uncertainty and the upheaval in the global trading system. We want to know if you are rethinking the value chains that you built in the past. If so, we want to know what kinds of alternative arrangements you are putting in place and what that may mean for productivity and prices.

Clearly, the Canadian economy is not immune to global developments. We are watching for signs that adverse impacts of trade disputes are being felt beyond the export sectors that are directly affected. So far, all of the trade actions have been against firms in the goods sector, and the service sector has remained relatively resilient in most countries. We are looking to see the extent to which weakness from manufacturing may be spreading to services, employment, consumer spending or housing. In this regard, the most recent data have been mixed, so we continue to monitor the situation closely.

By the way, next week we will begin publishing a regular report about the Bank’s quarterly Canadian Survey of Consumer Expectations. From now on, we will publish this alongside our current report on the Business Outlook Survey. Taken together with data from our Senior Loan Officer Survey, these give a more complete picture of the expectations of consumers, firms and lenders as an input into our interest rate decisions.

Labour and housing markets

A second area we will be watching closely is the intersection between Canada’s labour and housing markets.

Our labour market has shown a healthy trend over the past year. Even though growth in new jobs seems to have slowed very recently, wage growth has continued to strengthen. We will be watching the data carefully to see how much of the recent moderation persists. In this respect, it is important to understand that labour market conditions vary quite a bit across different regions.

Meanwhile, population growth has increased recently, driven by immigration. This, too, has varied across regions. Provinces such as British Columbia, Ontario and Quebec, where job growth has been strong, continue to attract the bulk of new immigrants. This combination of job growth and rising population has supported a rebound in housing over the past year.

Should this housing rebound continue, we will be watching for signs of extrapolative expectations returning to certain major housing markets—in other words, froth. The fact is, the fundamental demand for housing appears to be outpacing our ability to build new homes, which can put renewed upward pressure on prices. It can be very unhealthy when the situation becomes speculative because it can lead to a sudden downdraft in house prices later, with wider implications for the economy.

Stronger housing activity also means more household debt, of course, which continues to be Canada’s biggest financial system vulnerability. The good news is that with the B-20 guideline working to reduce the riskiest borrowing, we are confident that the stock of household debt is becoming less of a threat over time.

Assessing the economy’s capacity

The third area is business investment. As you know, the trend in business investment has been running below expectations for the past three years. We ascribe this mainly to uncertainty around trade rules.

However, we received a surprise with the national accounts data for the third quarter, which were published at the end of November. This report showed unexpectedly strong growth in business investment. What is more, previous data were revised upward quite significantly.

Staff have been digging into the data, aiming to get a better understanding of what is happening with investment. This is crucial to the outlook for the economy because investment is both important for growth and vital for building the economy’s productive capacity. And the whole concept of investment is evolving with the digitalization of the economy, making it much harder for Statistics Canada to measure. We will have a more complete narrative around this issue in a couple of weeks. But one element that I can mention today is that the revisions have made the federal government’s infrastructure program more visible in the data.

What are financial markets telling us?

The fourth major area for us is to understand what financial markets are telling us. You may recall that a year ago many commentators were talking about the inverted yield curve—short-term interest rates were higher than long-term yields in many markets. Some took this as a sign of imminent recession in Canada and elsewhere. At the time, we were forecasting economic growth for 2019 of close to 2 percent, and some saw this as far too optimistic.

By last October, the Bank was estimating 2019 growth would be about 1.5 percent—a little less than what we had said a year ago, but not too far out of line. The final result will depend on the fourth quarter, but the point is, the dreaded inverted yield curve did not lead to a recession last year. There is certainly some historical correlation between inverted yield curves and recessions. However, in a period of low interest rates and generally flat yield curves, we may see more frequent inversions that indicate slowdowns, rather than recessions.

Meanwhile, many stock markets have been posting record highs lately. This suggests that markets are taking a relatively positive view of the prospects for corporate earnings, despite all the uncertainty over the global trading environment. Certainly, it seems that the potential downside risks have eased as the United States and China approach a deal. This all bears watching during the coming year. Perhaps the lesson from all of this is this: never ignore what markets are telling you, but keep in mind that they are prone to exaggeration.

New $5 note coming

That gives us at least four things to talk about in the fireside chat. But I want to make it five. That is because the Bank of Canada is close to announcing plans for a new $5 bank note. An ongoing priority for us at the Bank is providing Canadians with bank notes that include the latest security features so that they can continue to use them with confidence.

I can tell you today that we will soon be launching public consultations about who should appear on the new $5 note. This will be similar to the public consultations that led to the selection of Viola Desmond for the $10 note. This time we will be asking all Canadians to nominate any historic Canadian—someone who is truly banknote-able. So stay tuned for details about how you can get involved, coming around the end of the month.

With that, let us now turn to our discussion.

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Unveiling the Reality of Canada’s FACE Loan for Black Businesses




In an effort to address economic disparities and promote entrepreneurship among Black communities, Canada introduced the Federal Black Entrepreneurship Program (FBEP) and the associated Black Entrepreneurship Loan Fund (BEFL). However, recent revelations have brought to light a shocking reality: the underutilization and obstacles faced by Black businesses in accessing the FACE (Funding for Black Entrepreneurship) loans. In this thought-provoking article, we delve into the numbers and uncover the challenges and experiences of Black entrepreneurs in navigating these loan programs. Through interviews with business owners, experts, and advocates, we shed light on the systemic barriers that hinder their success and explore potential solutions for a more equitable and inclusive lending landscape.

The FACE loan program was created with the intention of providing financial support and resources to Black-owned businesses. However, the reality has been far from the expected outcomes. Jessica Thompson, an economist specializing in racial disparities, states, “The FACE loan program was designed to address historical economic disadvantages, but the numbers reveal a significant gap between its objectives and the lived experiences of Black entrepreneurs.”

Black entrepreneurs face numerous hurdles when attempting to access FACE loans. A lack of awareness about the program, complex application processes, and limited outreach to communities in need contribute to low participation rates. Michael Johnson, a business owner, shares his frustration, saying, “It’s disheartening to see a program that was meant to uplift Black businesses fall short due to bureaucratic obstacles. Many of us struggle to navigate the application process and meet the stringent criteria.”

Systemic barriers and discrimination persist within the lending landscape, perpetuating the cycle of inequality. Dr. Maya Williams, a sociologist specializing in racial disparities, explains, “Structural racism and bias continue to disadvantage Black entrepreneurs. Discrimination in loan approvals, higher interest rates, and limited access to capital contribute to the challenges faced by Black-owned businesses.”


The consequences of the FACE loan program’s shortcomings are far-reaching. Many Black-owned businesses struggle to access the capital needed for growth, expansion, and operational sustainability. Tanya Campbell, a business owner, emphasizes, “The lack of financial support hampers our ability to scale our businesses, hire employees, and contribute to the local economy. It perpetuates a cycle of limited opportunities and restricted growth.”

To address the disparities within the FACE loan program, experts and advocates propose several solutions. Improved outreach and community engagement, simplified application processes and tailored support services can increase access and awareness among Black entrepreneurs. John Stevens, a business consultant, suggests, “The government must invest in targeted initiatives that address the specific needs and challenges faced by Black-owned businesses, such as mentorship programs, financial literacy training, and capacity-building initiatives.”

Addressing the challenges faced by Black entrepreneurs requires collaboration and accountability from various stakeholders. Governments, financial institutions, and community organizations must work together to create an inclusive lending ecosystem. Mary Johnson, an advocate for Black economic empowerment, states, “Transparency, accountability, and ongoing dialogue between policymakers, lenders, and Black entrepreneurs are essential to drive meaningful change and ensure equal opportunities for all.”

The FACE loan program aimed to empower Black entrepreneurs and address economic disparities, but the reality falls short of expectations. The underutilization and obstacles faced by Black businesses in accessing FACE loans highlight the pressing need for systemic change within the lending landscape. By acknowledging and addressing the structural barriers, streamlining processes, and fostering collaboration, we can create a more inclusive and equitable environment where Black entrepreneurs thrive. It is through proactive measures, collective effort, and ongoing dialogue that we can dismantle systemic inequities and build a future where Black-owned businesses have equal access to the resources and support necessary for success.

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Oil Prices Climb As Default Fears Fade



Crude oil began trading this week with a gain after President Biden and House Speaker Kevin McCarthy were reported to have reached a provisional agreement on raising the debt ceiling.

At the time of writing, Brent crude was trading at over $77 per barrel and West Texas Intermediate was changing hands at over $73 per barrel.

Debt ceiling negotiations have been a major factor for oil price movements in the past couple of weeks, mostly because of the apparent inability of Republicans and Democrats in Congress to strike any semblance of an agreement on how to increase the federal government’s borrowing power.


According to early reports on the tentative deal, it involves flat spending over the next two years and the recycling of unused Covid funds.

Although such tense negotiations have been relatively regular in past years, they have eventually ended with an agreement, and default has invariably been avoided.

This historical evidence could have served to stabilize prices but it did not, and neither did mixed data about China’s recovery. On the one hand, PMI readings are showing an uneven rebound in economic activity, but on the other, demand for oil as evidenced by import rates, is going strong.

To complicate the picture further, OPEC+ is reportedly in two minds about what to do with its output at its next meeting.

According to reports quoting Saudi Energy Minister Abdulaziz bin Salman, he has hinted at another round of output cuts.

According to reports quoting Russia’s Deputy Prime Minister and top OPEC+ official Alexander Novak, the co-leader of the extended cartel is fine with production where it is right now.

Thanks to its recent gains, oil’s decline since the start of the year has shrunk from about 14% earlier this month to just 9% as of the start of this week, according to Bloomberg.

By Irina Slav for



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U.S. debt-limit deal brings relief tinged by caution



American equity futures posted modest gains amid cautious optimism the U.S. will avert a catastrophic default after the weekend’s tentative debt-ceiling deal. European stocks wavered in muted holiday-affected trading.

Contracts on the S&P 500 climbed about 0.2 per cent, while those on the Nasdaq 100 were up around 0.3 per cent, with trading set to end early for Memorial Day. The dollar, which has benefited from angst around the statutory borrowing limit, held Friday’s decline while Treasury futures were flat in the absence of cash trading.

The Stoxx Europe 600 index edged lower, with Spain’s benchmark underperforming after Prime Minister Pedro Sanchez called a surprise snap election following heavy losses for his party in regional and local elections Sunday. Volumes were about 60 per cent lower than usual as markets in the U.K. and some European countries remained closed for national holidays. SBB gained after the embattled Swedish landlord said it may look to sell the company. A gauge of Asia-Pacific equities rose, though Chinese shares slid closer to a bear market.

President Joe Biden and House Speaker Kevin McCarthy expressed confidence that their agreement to curtail spending and extend the borrowing limit will pass through Congress. But even assuming lawmakers seal the deal before the U.S. government runs out of cash in about a week, traders still have much to contend with — from the prospect of another interest-rate hike from the Federal Reserve to a likely deluge of bond issuance from the U.S. Treasury Department.


“The obvious positive interpretation is that a negative tail risk is close to being taken off the table,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “With the distraction of the debt ceiling fading into the background, investors can now refocus their attention on the underlying fundamentals. One concern, though, is that the fundamental picture remains precarious.”

European bonds rose, with Germany’s 10-year yield falling about 11 basis points. Spain’s 10-year yield dropped by a similar amount.

Meanwhile, Turkey’s lira weakened after Recep Tayyip Erdogan won a presidential runoff election on Sunday, extending his time as the nation’s longest-serving leader and leaving investors looking for any signs he’ll start to relax the state’s tight grip over markets. The nation’s stocks benchmark gained.

Gold was flat on waning demand for havens, while as oil held onto most of Friday’s gains and Bitcoin climbed, reflecting a modestly buoyant tone.


The agreement struck by Biden and McCarthy is running against the clock given that June 5 is the date when Treasury Secretary Janet Yellen has said cash will run out. There is plenty in the deal that Democrats and Republicans won’t like.

“Uncertainty persists regarding the duration and severity of the ongoing earnings recession, and perversely, the near-term tightening of liquidity may worsen due to the government’s need to address its debt issuance backlog,” said Suzuki. “While the markets managed to avert an immediate crisis, the coast is far from all-clear just yet.”

The rate-sensitive two-year Treasury drifted Friday as traders considered how a debt agreement could play into the Fed’s path forward on interest rates. The two-year yield hovered around 4.65 per cent after a report on consumer spending showed the Fed still has more work to do to bring inflation back toward its target.

“Markets will have the liquidity hassles to deal with, as the Treasury will issue a deluge of bonds to restore its cash reserves,” said Charu Chanana, market strategist at Saxo Capital Markets. “Not to forget, the hawkish re-pricing of the Fed path that we have seen last week could possibly get firmer if we get a hot jobs print this week.”

Key events this week:

  • U.S. Memorial Day holiday. U.K., Switzerland and some Nordic markets also closed for holidays, Monday
  • Eurozone economic confidence, consumer confidence, Tuesday
  • U.S. consumer confidence, Tuesday
  • Richmond Fed President Thomas Barkin interviewed by NABE as part of monetary policy webinar series, Tuesday
  • China manufacturing PMI, non-manufacturing PMI, Wednesday
  • U.S. job openings, Wednesday
  • Fed issues Beige Book economic survey, Wednesday
  • Philadelphia Fed President Patrick Harker has fireside chat on the global macro-economy and monetary conditions, Wednesday
  • Boston Fed President Susan Collins and Fed Governor Michelle Bowman speak in Boston, Wednesday.
  • ECB issues financial stability review, Wednesday
  • China Caixin manufacturing PMI, Thursday
  • Eurozone HCOB Eurozone Manufacturing PMI, CPI, unemployment, Thursday
  • U.S. construction spending, initial jobless claims, ISM Manufacturing, light vehicle sales, Thursday
  • ECB issues report its May 3-4 monetary policy meeting. ECB President Christine Lagarde speaks at German savings banks conference, Thursday
  • Philadelphia Fed President Patrick Harker speaks on economic outlook at NABE’s webinar, Thursday
  • U.S. unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:


  • S&P 500 futures rose 0.2 per cent as of 9:56 a.m. New York time
  • Futures on the Nasdaq 100 rose 0.3 per cent
  • The Stoxx Europe 600 fell 0.2 per cent
  • The MSCI World index was little changed


  • The Bloomberg Dollar Spot Index was little changed
  • The euro fell 0.1 per cent to US$1.0709
  • The British pound was unchanged at $1.2344
  • The Japanese yen rose 0.3 per cent to 140.22 per dollar


  • Bitcoin rose 1.3 per cent to $27,919.46
  • Ether rose 2.5 per cent to $1,901.1


  • Germany’s 10-year yield declined 11 basis points to 2.43 per cent


  • West Texas Intermediate crude fell 0.3 per cent to $72.43 a barrel
  • Gold futures were little changed



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