Bank of Canada should lower interest rates independently of the Federal Reserve

The Bank of Canada is facing criticism for its nonchalant attitude towards the state of the Canadian economy. Despite increasing excess capacity, inflation turning to disinflation, and a contraction in real output per capita, the Bank seems unfazed. Business insolvencies have surged by 87% over the past year, while the number of unemployed individuals has also risen significantly.

Concerns about a housing bubble have been put to rest as home sales in the Greater Toronto Area have cooled, new listings have increased, and residential real estate prices are stabilizing. The Canadian dollar is expected to depreciate, providing stimulus to the economy and easing domestic monetary conditions.

The need for a weaker exchange rate is emphasized to realign the country’s cost structure with the U.S. and address net direct investment outflows. The lack of competitiveness, negative productivity growth, and capital deepening issues have led to a fundamental bear market for the Canadian dollar.

The article highlights the necessity for the Bank of Canada to cut rates independently and the importance of addressing domestic competitiveness to boost economic growth. The government’s focus on fairness over growth and lack of measures to enhance productivity are criticized, with calls for a more proactive approach to economic policy.