COMING SOON: BIG MOVES BY THE BOC, FED

OTTAWA • After a short respite from monetary movements, more could soon be on the way. And at least one of them might be “a biggie.”

Both the Bank of Canada and the U.S. Federal Reserve will meet in the coming days and weeks to deal with some unfinished business. For Governor Stephen Poloz and his monetary team, the issue is whether the Canadian economy can embrace another rate hike after the July ice-breaker the first increase in seven years.

Fed chair Janet Yellen and her policy board, meanwhile, have dual concerns about stalled plans to gradually raise lending levels and unwinding the nearly 10-year quantitative easing (QE) program that saw the U.S. central bank buy US$4.5 trillion in bonds and other financial instruments to reduce interest rates in a bid to pump up private investment and spending.

As proven by last week’s data, both the Canadian and U.S. economies are now far removed from where they stood in 2008 in the midst of a global financial crisis and the Great Recession. But monetary policy remains a work in progress for both countries and timing is crucial for any stimulus withdrawal.

The Fed’s Sept. 19-20 gathering appears to have increased in importance, given the growing anticipation for the pull-back on QE.

“The meeting in September is a biggie,” said Douglas Porter, chief economist at BMO Capital Markets in Toronto. Yellen and the other Fed policy members “are expected to announce the first steps toward undoing QE at that one - and commencing in October - presuming there is no (U.S.) debt ceiling, government shutdown fiasco.”

So far, the U.S. economy appears to be co-operating with that plan. Even so, there are two more opportunities for the Fed to make a move on this year’s calendar — during their Oct. 31-Nov.1 or Dec. 12-13 policy sessions.