Such an action by the central bank generates a decline in interest rates, stimulates the credit demand of firms, and invigorates a variety of economic activities such as investment. Ultimately, it will increase “money,” which represents income and wealth. A possible counter-argument is that dropping money from a helicopter – or money from heaven – will stimulate the economy and raise prices.
These were important headwinds preventing Canadian interest rates from rising by as much as US rates did during 2017–18. Nevertheless, as other economies feel a growing impact from the trade war, there are second-round impacts on Canada through weaker exports and lower commodity prices.