{"id":1426,"date":"2026-06-29T14:46:03","date_gmt":"2026-06-29T14:46:03","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/simonharry\/?p=1426"},"modified":"2026-06-30T13:56:16","modified_gmt":"2026-06-30T13:56:16","slug":"stimulus-like-winter-is-coming","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/simonharry\/2026\/06\/29\/stimulus-like-winter-is-coming\/","title":{"rendered":"Stimulus, Like Winter, Is Coming"},"content":{"rendered":"<h2>When interest rates fall in a forest\u2026 and there is no one around to hear\u2026 did they fall?<\/h2>\n<p><span style=\"font-size: 12pt\">Prime Minister Mark Carney\u2019s government and the Office of the Superintendent of Financial Institutions (OSFI) just:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 12pt\">Lowered the Domestic Stability Buffer (DSB) from 3.5% to 3.0%\u00a0<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Narrowed the buffer\u2019s potential range from 0\u20134% to 0\u20133%\u00a0<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Maintained a Common Equity Tier 1 (CET1) supervisory expectation of ~11% of risk\u2011weighted assets\u00a0<\/span><\/li>\n<li><span style=\"font-size: 12pt\">More broadly signalled a policy stance aimed at enabling banks to deploy more capital into the economy <\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 12pt\"><strong>\u00a0<\/strong><\/span><span style=\"font-size: 12pt\"><strong>What does this Mean?<\/strong><\/span><\/p>\n<p><span style=\"font-size: 12pt\">In Canada, banks:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 12pt\">Are being allowed to deploy roughly $74 billion of additional capital immediately\u00a0<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Can expand their balance sheets equivalent to roughly $673 billion in additional risk\u2011weighted assets\u00a0<\/span><\/li>\n<\/ul>\n<h3><span style=\"font-size: 12pt\"><strong><u>This is a kin to lowering interest rates.<\/u><\/strong><\/span><\/h3>\n<p><span style=\"font-size: 12pt\">While lower interest rates make borrowing for everyone <strong><u>cheaper.<\/u><\/strong><\/span><\/p>\n<p><span style=\"font-size: 12pt\">Banks are now allowed to lend and invest more\u2026 which means borrowing just got <strong><u>easier.<\/u><\/strong><\/span><\/p>\n<h3><span style=\"font-size: 12pt\"><strong>This is Monetary Policy\u2026 Without Moving Rates<\/strong><\/span><\/h3>\n<p><span style=\"font-size: 12pt\">This move matters more than it seems. The DSB is effectively a \u00a0\u201crainy day\u201d capital cushion held by Canada\u2019s largest banks.<\/span><br \/>\n<span style=\"font-size: 12pt\">By saying it can be lowered, regulators are explicitly signalling that the system is strong. \u00a0Banks can\u00a0now go forth and deploy capital.<\/span><\/p>\n<p><span style=\"font-size: 12pt\">Banks have additional balance sheet capacity which can show up as:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 12pt\">More loans<\/span><\/li>\n<li><span style=\"font-size: 12pt\">More underwriting risk<\/span><\/li>\n<li><span style=\"font-size: 12pt\">More corporate financing<\/span><\/li>\n<li><span style=\"font-size: 12pt\">More mortgage availability<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 12pt\">In other words, we now have easier financial conditions.<\/span><\/p>\n<h3><span style=\"font-size: 12pt\"><strong>Stimulus and Signals<\/strong><\/span><\/h3>\n<p><span style=\"font-size: 12pt\">This not only stimulates the economy, but is a harbinger of things to come.\u00a0 Mark Carney our Prime Minister is: a PhD economist, former Goldman Sachs banker, former Governor of both the Bank of Canada and Bank of England, the only policymaker globally who has run two G7 central banks and coordinated post\u2011crisis global regulation.\u00a0Because Carney has a majority he can make changes faster in Canada than almost any other policymaker can in the free world.<\/span><\/p>\n<p><span style=\"font-size: 12pt\">South of the border, Trump has been openly calling for interest rate cuts. While monetary policy remains constrained, the administration has pursued stimulus through other channels just as Canada is at this time.<\/span><\/p>\n<p><span style=\"font-size: 12pt\">We see this through:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 12pt\">Tax cuts and fiscal policy<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Deregulation<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Tariffs and industrial policy<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Targeted capital framework adjustments<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 12pt\">The U.S. is stimulating, just like Canada has now done.<\/span><\/p>\n<h3><span style=\"font-size: 12pt\"><strong>The Key Message for Markets<\/strong><\/span><\/h3>\n<p><span style=\"font-size: 12pt\">There are more ways to stimulate the economy than just through interest rates, and we just saw one.\u00a0 Interest rates did not fall, but financial conditions improved.<\/span><\/p>\n<p><span style=\"font-size: 12pt\">This announcement is intended to:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 12pt\">Increase lending<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Increase investment<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Increase liquidity available to the economy<\/span><\/li>\n<li><span style=\"font-size: 12pt\">Support asset prices<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 12pt\">And importantly for market watchers this announcement will likely lead to higher stock market and housing prices and a tailwind for the real economy.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When interest rates fall in a forest\u2026 and there is no one around to hear\u2026 did they fall? Prime Minister Mark Carney\u2019s government and the Office of the Superintendent of Financial Institutions (OSFI) just: Lowered the Domestic Stability Buffer (DSB) from 3.5% to 3.0%\u00a0 Narrowed the buffer\u2019s potential range from 0\u20134% to 0\u20133%\u00a0 Maintained a [&hellip;]<\/p>\n","protected":false},"author":35,"featured_media":1430,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-1426","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/1426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/comments?post=1426"}],"version-history":[{"count":6,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/1426\/revisions"}],"predecessor-version":[{"id":1435,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/1426\/revisions\/1435"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/media\/1430"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/media?parent=1426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/categories?post=1426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/tags?post=1426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}