Bank of Canada is scheduled to publish its quarterly Monetary Policy Report tomorrow. The boost in growth from infrastructure spending will help take up economic slack, but the bulk of the impact is likely to occur after the output gap has already closed.
The Bank of Canada is expected to begin raising interest rates in July of 2017, increasing the policy rate to 1.25% (from its current level of 0.5%) by the end of 2017, states TD Economics. It is possible that with additional infrastructure-led growth the Bank may choose to begin hiking rates earlier and perhaps more aggressively.
Canada's federal net debt is expected to reach 26.5% of GDP by 2021, down from roughly 30% at present, and still the lowest level among the G7 major economies, says TD Economics. From a growth perspective of the economy, the outlook is likely to change as policy is implemented and further details become available.
It is difficult to assess exact impacts at this early stage, but should the Liberal infrastructure spending materialize, the program could boostannual growth of Canada in 2016 and 2017 by up to 0.1 and 0.3 percentage points respectively, estimates TD Economics.
