Please leave

Well, Elbows-up Cadets, hang on to your boxers. This will be a pivotal week.

Central banks in both Canada and that other country review their interest rate policies, with the boss of one of them on perilous ground.

Plus, it’s Tariff Day on Friday, with the odds decreasing by the hour Canada will come out of this trade war with a sweetheart deal. Despite what your mom told you, we’re apparently not special. As went Japan, the UK and Europe, so shall go our Dominion.

First, to rates. Mortgages are north of 4% again and, yes, they’ll be staying there. That means a lousy resale housing market, fresh record levels of inventory, new home sales drifting towards zero and that maddeningly-slow melt in prices.

Our CB has held the line on rates for the last three reviews. No. 4 coming. It stays at 2.75% until (maybe) September. If we hit a trade war wall then, with a weakening labour market (GM in Ontario was just whacked) there could be a quarter point nip.

At this point our guys point to core inflation stuck at 3% (even as the headline number sits at 1.9%), which is north of the target. The jobs market is swell – 83,000 more created last month – and the Carney Libs are soon to flood the country with new spending on big stuff. Pipelines. Tanks and vessels. Billions for pre-fab housing. Ports and roads north. With all that fiscal stimulus coming in the autumn federal budget, the central bank figures it should hold off on the monetary stimulus. It can, at least, take the time to see what happens with Big Daddy, Trump and the GDP.

But what about inflation ignited by the orange guy’s anti-maple moves? After all, we went from almost-free trade with the US to a 50% hit on steel and aluminum, lumber duties, car taxes and soon a blanket levy on much more. This is an unprecedented, unpredictable, capricious and evolving situation. Trump wants everyone to be afraid and uncertain, so he may be more powerful. Sad.

Anyway, no change.

“How can you adjust policy when you haven’t a clue what trade and fiscal policies might unfold and you are still fighting the last inflation fight alongside resilient data like job growth?” asks Scotia economist Derek Holt. “That merits keeping their powder dry with data to date not indicating any great reason to rush a decision other than on a total policy lark.”

Now, what our central bank does is certainly influenced by the Fed. And it ain’t cutting, either. The next review is also at the end of this week, and once again – despite stiff lobbying by the America president – the policy rate will remain where it is, considerably higher than ours.

The Fed sees elevated consumer prices and increased inflation ahead as the trade war intensifies. Prior to Trump, the average tariff on stuff coming into America was 2.3%. Now it’s topped 17%, which is the highest since 1934 (a year of intense misery and suffering). Given the ‘deals’ Trump has just made, that rate is set to crest above 19% – the stiffest since 1906. That’s when this guy was president. Nice stash.

US tariffs on imports were in the 50% range for most of the period that protectionist Republicans ruled the US – an almost 70-year stretch after the Civil War, leading up to Teddy Roosevelt. The policy was intended to wall off America from Europe and build up the domestic manufacturing base of the northern states.

Of course, that was then – when the Chinese were not even on the radar, the telegraph was hot new technology and free trade was unknown. The US (like Canada) did not tax the income of its citizens, so tariff revenue was of outsized importance.

In short, nobody alive today has experienced the outcome of a 19th Century economic policy thrust upon a 21st Century world. It could help America by beggaring other nations. It could backfire. It could end up causing a global recession by making everything, everywhere more expensive amid slower growth. Bezos and Zuk will be okay. Folks making iPhones in Zhengzhou and Silverados in Flint and Oshawa, not so much. The point is – we do not know.

Finally, what will Trump do it the Fed chair sits on rates again this week? After all, he has called for a massive reduction, disparaged and insulted Jerome Powell, waived a letter firing the guy before media cameras and last week falsely accused him of incompetence in renovating the CB’s headquarters. To do so would be to invite chaos.

So there ya go. What a great week to go offline. Get out of here.

About the picture: “Blog Dawg WUL here,” writes Kurt. “I attach a photo of our wonderful departed family English Springer Spaniel. RIP Rex. I sing the praises of a Springer as a family pet. Gentle, friendly, intelligent and energetic. Springer is an apt name. When a young dog on a walk, he would leap waist high every second stride. A special bird hunting dog. He flushed birds as opposed to pointing. He would dive head first through the thickest brambles to flush birds and it would take an hour to remove the burrs his coat picked up. The “feathers” on his chest and belly were a shield from the thistles and needles on the undergrowth. Finally, I extend my sincere thanks to you and your team for the entertaining and highly educational blog. Cheers from Cowtown.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/07/28/please-leave/