The overall impact of QE2 may be more modest than previous interventions when market dislocations were more severe. 4 The Bank of Canada anticipated the Fed’s latest move when we published our October projection (not hard to do, given the openness with which the Fed discussed its plans). Overall, we expect the net impact on Canadian GDP to be positive but small.
This balances the impact of stronger U.S. growth on demand for Canadian goods and services, as well as on our terms of trade, with the possibility of further drag on non-commodity exports arising from the persistent strength of the Canadian dollar.