The head of the Bank of Canada says the negative impacts of low oil prices that have struck Western Canada will reverberate across the entire national economy.
But governor Stephen Poloz says the sting of weaker crude prices will likely have a smaller impact across Canada than the 2015 oil-price crisis, which contributed at the time to a slight, technical recession.
In prepared notes of his speech today in Toronto, Poloz says oil and gas production now makes up just 3.5 per cent share of Canada’s, compared to six per cent in 2014.
Looking at the positive side, Poloz says the latest oil-price shock also arrives at a time when Canada’s economy is running close to full tilt and the unemployment rate is at a 40-year low.
The central bank has been on a rate-hiking path to keep inflation from running too hot – but on Wednesday it left its trend-setting interest rate unchanged as it underlined negatives such as the recent drop in oil prices and an unexpected decline in business investment.
Poloz says in his speech that economic data since October have been on the disappointing side and market watchers believe the developments will delay the timing of future rate hikes.