Unconventional policy toolkit unlikely to be tested

While we have long argued that the fallout from the oil shock would be disruptive and that hopes for an export revival were misplaced, we doubt that the Bank of Canada will need to resort to negative interest rates or quantitative easing anytime soon. Expansionary fiscal policy will soon take over as the main stimulus driver, and if we are correct about commodity prices rebounding next year, then we don’t envisage the economy suffering so badly that it would also require unconventional monetary stimulus too.