U.S. / Canada: Different Economic Outlook? Not Likely

Fed Chairman Jerome Powell has (apparently) indicated a willingness to cut interest rates at the next FOMC meeting on July 31. In his testimony to the U.S. House of Representatives today he testified that: 

"Growth indicators from around the world have disappointed on net, raising concerns that weakness in the global economy will continue to affect the U.S. economy. These concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data."

Remember that the Fed is "data dependent".

Meanwhile, on our home turf, in its interest rate decision today, the Bank of Canada suggested that things economic in Canada were improving:

"Recent data show the Canadian economy is returning to potential growth. However, the outlook is clouded by persistent trade tensions. Taken together, the degree of accommodation being provided by the current policy interest rate remains appropriate."

So why is the U.S. ready to cut rates and Canada is not?

Consumers appear to be  confident (at the moment): 

The Bank of Canada may be particularly encouraged by the recent bounce-back for Canadian consumer confidence (dotted line). This appears to be in line with better wages and salaries data for April in Canada (although that seems quite a while back):

Perhaps there has been some political interference south of our border?

We should all worry if the independence of a central bank is compromised. But Chairman Powell (in his testimony)said he would not leave his post if asked to. 

Still, stock markets appear to be emboldened by economic weakness and lower interest rates, despite expectations of much slower earnings growth:

And clearly significantly less liquidity to prop up prices as the Fed has been tightening (shrinking the Monetary Base) since 2016:

So even if the Fed does cut rates, stocks seem to be well ahead of themselves.