Economies at ‘very different’ cycles: Canada’s key rate set to lag fed’s for first time since 2007 – Financial Post

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Canada and the U.S., among the world’s biggest trade partners, are diverging when it comes to how their central banks view the recovery.

That’s reflected in the odds investors are assigning to a rate increase this month at the Bank of Canada (zero) versus the Federal Reserve (100 percent). Governor Stephen Poloz makes his decision Wednesday at 10 a.m. from Ottawa. A rate increase from the Washington-based Fed on Dec. 14 would take the U.S. past Canada for the first time since 2007.

It’s not out of the question that the Bank of Canada could even still cut rates, even with output growth and inflation rebounding. Poloz has kept the idea of decreasing his 0.5 percent benchmark rate alive because, he says, Canada is vulnerable to any fresh shock. The Fed will increase rates to a range of 0.5 percent to 0.75 percent, according to economists in a Bloomberg survey.

“The Canadian…

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