Host: It's a common view that the central banks in the US and in Canada are in lockstep. How true is that?

Guest: It's pretty true. It's not 100% true, but it's pretty true. I mean, the Canadian economy is so integrated with the United States that it makes sense that when they move their rates, we also move our rates. And over the course of, I'd say the last 25 years, we've been pretty much in lockstep with them, except for on a couple of occasions early in the 2000, we went our own way because we had an insurance issue that changed our prices. That was a temporary aberration. And then during the great financial crisis, we also didn't follow them exactly because they got themselves in an awful lot more trouble than we did. And so they lowered their rates more than we did, but we still moved in parallel to them. We just kept them a little bit higher. And then more recently, in the last, the last three years, we've been our rates have been different than theirs. And again, that's partly because in the in the United States, growth is strong. Here it's not as strong. And so we've gone our own way and kept rates lower a little bit lower than theirs. But we have moved every you know we're moving in parallel with them just a little bit lower. So there's no doubt the influence of American rates over Canadian rates is it's extremely strong and the ties are extremely strong.

Host: President Donald Trump has been pressuring the current chair of the Federal Reserve, Jerome Powell, to drop interest rates. Help us understand the controversy behind this.

Guest: So central banks have made their name over the course of the last generation by being independent. And that's the way we've been able to keep inflation under control in many rich countries. So. Well, I mean, it's not been perfect, but it's been fairly a fairly good experiment because because, you know, people in the public and investors know that their central banks will act and use interest rates to control inflation and not to control some of these political whims. And so when Donald Trump comes along and tries to put pressure on on Jerome Powell to cut interest rates, that's potentially quite destructive. You know, we know in the backs of our minds that a lot of politicians want easy money. They want to keep rates lower than they than they necessarily should be for inflation, because they lower rates. Insight investments, they could bring an immediate bump in terms of jobs and growth. And that feels good for for the for the voting public. And it feels good for a politician who wants some credit. It's just that the the longer term effects, or even the medium term effects on inflation could be quite devastating. And the effects on stability and the investment environment also thrown up into the air. So when Donald Trump is putting pressure on Jerome Powell and then changes, you know, changes the the chairman of the Federal Reserve accordingly, there are a lot of questions being asked and a lot of presumptions among the general public and, and among the, among investors about whether things are going to operate as they've understood them to operate in the past.

Host: Well, let's talk about Jerome Powell's potential replacement, Kevin Warsh. He has been named but still has to go through Senate. But what has the reaction been so far?

Guest: Well, Mark Carney came out and said it was a fantastic choice. And that was an interesting reaction because I wouldn't have expected Mark Carney to respond so quickly to an announcement of a central banker. I mean, obviously, a prime minister used to be a central banker himself and has had many has has a lot of insight into Kevin Warsh and who who he is. And so, okay, yes, of course, we all want to know what Mark Carney thinks of Kevin Warsh. So that was an interesting reaction. But it's not a universal by any means. You know, there are a lot of analysts out there looking at the nominee and saying, okay, he's got a history of a hawk, meaning he has wanted to keep a tight grip on on inflation, which is not not Donald Trump at all. So how does that work? And then there's been a lot of interesting research into into his Warriors statements over, over the past little while. And it seems that there's a, there's there's some willingness on the part of Warsh to think about lower interest rates under a Republican president. So, you know, we're interpreting everything that he's done in the past through through politics rather than what he's done through through monetary policy per se. But there's no doubt he has got monetary policy credentials.

Host: If it is the latter, what does that mean?

Guest: Well, if he's got Republican tendencies and or if he's got some sympathy for for Donald Trump, he's we will everybody will be watching for that for sure. He has to persuade everybody else involved in making decisions at the Federal Reserve to go his way, because he's not just up to him, but he is extremely he will be extremely influential. And over the longer term, you know, if he's doing the if he's doing the president's bidding for him, there's going to be some, some an awful lot of scrutiny to see what happens to inflation and borrowing conditions in the bond market, not just in the United States but around the world. We're already seeing markets move as a result of his his nomination. We're seeing gold and silver mean both of those were just dropped precipitously over the last little while, partly because, you know, they were up really high in a hedge against Donald Trump and his influence over the over the over the Federal Reserve. So, you know, he named Warsh and then the prices of those those two metals fell dramatically. You know, currencies around the world will fluctuate based on on what he does, including the Canadian dollar. And so that influences our borrowing conditions, that influences our economy going forward.

Host: Heather, in our last 30 seconds, if trade tensions continue and the U.S. and Canadian economies are no longer in lockstep and aren't as integrated, what can we expect from the Bank of Canada's monetary policy?

Guest: So the Bank of Canada plays a pretty straight. They are fixated with inflation. They raise and lower rates according to where they think inflation is going to go. And I don't expect that to change. It's just that what happens to inflation is very tied into what happens with the United States. And yes, we hear an awful lot about, you know, diverging our trade away from the United States. But I think the the fact of the matter is we are still very, very integrated with them, not just our trade, but our, more importantly, our financial markets and our investment flows. And so I expect we will be moving in lockstep, maybe not every single time, but frequently with the United States for some time to come.

Host: In your 30 years of reporting on economic policy, have you seen anything like this before?

Guest: I have not. I mean, it's interesting with the Bank of Canada, they came out with their forecast and their their assessment of the Canadian economy last week. And their first paragraph was saying everything is kind of the same over the last few months. And their second paragraph is, but it's so unpredictable. We have no idea where we're going. And that is very, very rare for them to say that they they can't see into the future at all so that, you know, basically paralysed because they can't figure out where things are going next. I mean, I've looked at financial crises around the world over the last few decades and seen a lot of disruption, but I've never seen anything like this in terms of not having a way forward.

Host: Heather, we're going to leave it there. Thank you so much for your insights. Really appreciate it.

Guest: Okay. My pleasure.