Monday’s elections in Canada confirmed the status quo and the markets were calm. Inflation in the country, however, is rising to its highest level in eighteen years. And we talk about the tax on banks …
The final numbers are not yet available, but the result is clear: the Liberal Party won the federal elections in Canada on September 20, but did not get a majority of seats in the House of Commons. Prime Minister Justin Trudeau – who called early elections in mid-August without being able to provide a convincing reason – finds himself again at the helm of a minority government very similar to the one obtained in 2019, and which he would have liked to get rid of so as not to have to depend on the support of external forces. Despite the consensus obtained thanks to the good management of the coronavirus crisis, the electoral campaign proved to be rather difficult for him, more than expected. On the other hand, the Conservative Party fails to propose a sufficiently strong alternative,THE RESULTS
According to the latest updates, Trudeau’s Liberal Party won 158 seats in the House, less than the 170 necessary to obtain a majority. O’Toole’s Conservative Party got 121 but won the popular vote (34.1 percent; Liberals have 31.8 percent: their consensus is concentrated in urban areas). The Bloc of Quebec, the main party of the French-speaking and nationalist province of Quebec, won 31 seats. The New Democrats, center-left, 26 seats, while the Greens only 2. THE RISE OF THE CANADIAN DOLLAR
The Canadian dollar strengthened against the US dollar in Asian markets this morning. The projections, which indicated Trudeau’s victory (and his third term: and in power since 2015), have reassured investors that there will be no disruption to the economic support policies already seen. An even more fragmented result was feared, which could compromise the work of the government; instead the political scenario has remained substantially unchanged compared to that of 2019.
The Canadian dollar was trading 0.3 percent higher this morning than its US counterpart. In addition to the elections, the increase in the price of oil also has to do with it, of which Canada is one of the largest exporters in the world. The prices of West Texas Intermediate crude, the reference contract for the US market, rose by nearly 1 percent to $ 70.98 a barrel. WHAT THE BANKS WILL DO
Martin Pelletier, senior portfolio manager at Trivest Wealth Counsel, told Reuters that the Canadian election was a “non-event” as the situation is essentially the same as before and the markets will not react strongly. The reaction would probably have been different if the Conservatives had obtained a minority government, as there would have been changes in economic policies.
In the election campaign, Trudeau promised new investments of 78 billion Canadian dollars (62 billion US dollars) in five years, which will mainly go to the health sector and which will add to the 101 billion Canadian dollars package in three years already approved in budget for 2021.
Trudeau’s plan to raise taxes on banks’ profits, however, explains Pelletier, “will exacerbate the cost of living crisis, because in this country the banks operate within an oligopoly structure and consequently have the capacity to pass the aforementioned tax directly to the consumer “.
Karl Schamotta, chief market strategist at Cambridge Global Payments, similarly thinks that the victory of the Liberals “maintains the status quo” and ensures the continuation of the fiscal spending plans “that have supported the economy for the past year and a half”. INFLATION
During the election campaign, Trudeau said he did not believe that monetary policy was an absolute priority. However, the August data – published just days before the vote – showed that the inflation rate in Canada is at the highest levels of the last eighteen years: +4.1 percent, above the +3 percent ceiling set by the Bank of Canada, the central bank.
The institute, however, said it believes inflation will return to 2 percent in 2022. Governor Tiff Macklem says this is a “temporary” increase due to problems in global supply chains and the recovery in demand. of goods and services after the reopening of the economy.
The high prices of gasoline, housing (the housing market is very important to the Canadian economy) and transportation are fueling inflation in Canada.
