David Rosenberg: Time for Macklem to turn before it's too late

financialpost.com:

In contrast to the United States Federal Reserve, the Bank of Canada is running out of excuses to keep from acting as the proverbial deer in the headlights. The economy here is far weaker, fiscal policy is far less stimulative even with the spending largess in the federal budget, and there’s much more spare capacity being built up, particularly in the labour market.

The Bank of Canada, in its most recent post-meeting press statement, mentioned for the first time in years that the Canadian economy had swung into “excess supply” and added for good measure that “a broad array of indicators suggest that labour market conditions continue to ease.” Yet, the central bank continues to behave as if the economy is operating in an “excess demand” environment, which makes little or no sense at the current time.

The time has long passed to fiddle around on the sidelines even if Powell & Co. drag their heels, and it would hardly be the first time that the Bank diverged from the Fed. That said, one can reasonably expect the Canadian dollar to remain in the penalty box, but the country needs currency depreciation as an antidote to the relentless loss of domestic competitiveness (not exactly addressed in Tuesday’s budget).

Now, let’s go through the Canadian consumer price index (CPI) data. The headline came in at 0.25 per cent month over month, and we have seen benign numbers such as this (or lower) every month dating back to last September. The three-month trend is down to a mere one per cent annual rate and the six-month pace is at 1.65 per cent (to the second decimal place). All this points to a downward pull of the headline 2.9 per cent year-over-year rate — well off the 4.4 per cent trajectory a year ago.

The core CPI (ex-food and