Toronto –
The Looney’s value hit a four-month low against the US dollar on Wednesday, but some experts said Canadian consumers shouldn’t expect their wallets to take a big hit. I’m here.
The Canadian dollar Wednesday traded at 72.54 cents, its weakest level in more than five months.
CIBC chief economist Avery Shenfeld said the Bank of Canada has kept key rates unchanged for the first time in a year, while the Federal Reserve has become more aggressive with rate hikes. said that
He said higher import costs could lead to higher prices for things like food, but the impact on Canada’s inflation rate should be minimal.
“That’s a pretty small one in terms of inflation. We’re talking decimal places,” said Shenfeld.
“Not all exchange rate movements reflect import prices, even for imported goods. I got it.”
The Bank of Canada kept its key rate unchanged at 4.5% on Wednesday, based on an assessment of recent economic data. Shenfeld said the central bank is suggesting it won’t respond to gradual further weakening of the currency.
“Given the options, I think Canadians would be happier not to see another rate hike than to protect the Canadian dollar from a drop of a cent or two,” he said.
Darcy Briggs, senior vice president and portfolio manager at Franklin Templeton Canada, expects Looney to continue trading softly until the Fed reaches the end of its tightening cycle. said there is.
“It’s a currency thing. They make pretty dramatic moves pretty 1/8 fast 3/8,” he said. “They would rather dangle and then the volatility would spike,” he said.
Briggs said it could make life more expensive in the meantime.
“If the Canadian dollar is depreciating and depreciating against a basket of currencies, the products we import will be more expensive because, by definition, we are paying for them in a cheaper Canadian dollar,” he said. Said.
“That would lead to less consumption, which would actually cause inflation,” he said.
University of Toronto economist Angelo Merino expects the interest rate differential between Canada and the United States to last at least 10 months.
But while the weakening of the Looney could make U.S. dollar-denominated commodities more expensive, Merino said the impact on Canada’s inflation rate would not be significant.
“They will be important for certain goods and services,” he said.
“If you’re planning to go to Florida or Disneyland on vacation, you’ll see it soon.”
Merino said if the Canadian dollar remains low for an extended period of time, demand could shift from US goods and services to Canadian goods and services.
“Both Canadians and Americans will buy goods and services produced in Canada. That tends to be good for Canadian production, but it also leads to inflation,” he said.
This report by the Canadian Press was first published on March 8, 2023.
