Government change in Canada to result in a different policy mix: BofA
2025.01.07 10:15
Investing.com — Justin Trudeau, the leader of Canada’s Liberal Party, announced on January 6, his decision to step down from his position. The party is now in the process of selecting a new leader.
Once the new leader is chosen, Trudeau will also be replaced as the prime minister. Trudeau also revealed that the Parliament, initially scheduled to resume on January 27, will now be suspended until March 24, to accommodate the Liberal Party leadership race.
Several potential candidates for the party leader position have emerged, including the former Finance Minister, Chrystia Freeland, and Mark Carney, the ex-Governor of the Bank of Canada and the Bank of England.
Canada is set to hold a federal election no later than October 20, 2025. The election will decide the distribution of 343 seats in the House of Commons, an increase from the previous 338-seat electoral map, based on the 2021 census.
As of January 6, 2025, polling data from CBC News’s poll tracker indicates that the Conservative Party, led by Pierre Poilievre, holds a significant 24pp lead over the Liberal Party. Should the Conservatives maintain their lead in the opinion polls, it would practically assure them a majority in the House and the position of the next Prime Minister.
The Bank of America commented that a change in government from Liberal to Conservative would likely result in a different policy mix, potentially leading to a fiscal consolidation.
The new government would also manage Canada’s relationship with US president-elect Donald Trump. In their baseline scenario, the US is not expected to impose blanket tariffs on Canada, although the threat of tariffs could be used as leverage.
The Bank of America does not anticipate the Bank of Canada to react to the potential political uncertainty, as they believe the BoC is comfortable maintaining its rate in the neutral range. The Canadian Dollar is expected to continue acting as a buffer amidst potential changes in US policies towards Canada.
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