TD spells out dangers of Bank of Canada cutting rates too soon
In the coming months, the Bank of Canada is likely to begin its policy rate cuts despite sticky inflation continuing to exceed the institution’s 2% target – but TD economists are warning that this will pose a significant challenge in the central bank’s attempts to communicate to the public and anchor household inflation expectations. “The central bank will have to cut interest rates in the face of stubbornly high shelter costs because to neglect to do so risks running the economy aground,” TD said in a new analysis. “In turn, this could amplify household inflation expectations, which are sensitive to …
Four major banks reveal forecasts on upcoming inflation data
Economists and researchers from the four major banks in Canada have revealed their forecasts regarding the upcoming Canadian inflation data, as reported in an article by fxstreet.com. Headline inflation is expected to be at 2.9% year-on-year in November. The core trim is expected to fall to 3.3% year-over-year while the core median is expected to be at 3.3% year-over-year. If this occurs, headline inflation will be at its lowest levels since March 2021, and will also fall back within the 1-3% target range that the Bank of Canada has set. What are the four major banks’ forecasts? According to TDS, …
Is it too early to discuss Bank of Canada rate cuts?
The Bank of Canada’s decision to leave rates unchanged on Wednesday was an unsurprising one – but its continuing indication of a willingness to raise rates means it’s “probably premature” to discuss cuts at present. That’s according to Bank of Montreal (BMO) chief economist Doug Porter (pictured), who told Canadian Mortgage Professional that the central bank appears keen to pour cold water on the idea that it’s finished with rate hikes despite increasing certainty from financial markets. “The fact that they kept rates unchanged was absolutely expected, but we also thought they would still talk about the possibility of rate hikes, even …
Bank of Canada reveals final rate decision of 2023
The Bank of Canada has left its policy interest rate unchanged in its last scheduled decision of 2023, keeping rates where they are for a third consecutive announcement amidst evidence that previous hikes are proving effective in cooling the economy. The central bank kept its benchmark rate, which leads variable mortgage rates in Canada, at its existing level of 5.0% in Wednesday’s decision, meaning the current pause on rate increases is the longest since the Bank began hiking rates in March 2022. In its statement accompanying Wednesday’s decision, the central bank maintained a hawkish tone, indicating its governing council was …
BoC will be in no hurry to cut rates in 2024, warns economist
Despite emerging signs of a slowing economy, the Bank of Canada will not be that eager to cut rates within the next few months as inflation might take longer than anticipated to drop to the central bank’s 2% target, according to David Watt, chief economist at HSBC Canada. Watt said that any downward adjustment of the BoC’s policy rate is only likely to materialize after a few quarters. “We’re not thinking the bank is going to move until the second half of next year, maybe around mid-year, simply because we’re not convinced that the inflation numbers are going to come …
Canada’s inflation rate drops again
Canada’s inflation rate fell to 3.1% in October, still above the Bank of Canada’s target rate but down notably from its September reading of 3.8%. That slowdown was caused mainly by plummeting gas prices, with the cost of fuel at the pump falling by 7.8% compared with the same time last year. When gas price fluctuations were taken out of the equation, the consumer price index (CPI) grew by 3.6% last month, Statistics Canada said, down slightly from 3.7% in September. Unsurprisingly, skyrocketing mortgage interest and rent costs continue to contribute strongly to year-over-year price growth, while grocery prices also …
Canadian lending growth slows amid economic uncertainty
The conservative lending outlook of large Canadian financial institutions was a chief factor behind sluggish growth in the national debt market in 2023’s third quarter, with the pace of year-over-year loan issuance slowing compared with the prior year. Accounting firm BDO Canada’s newly released debt market report for Q3 showed that year-to-date loan issuance totalled $1.36 trillion by the third quarter – but a 5% increase in loan issuance was down significantly over 2022 levels. Canadian banks have taken an increasingly cautious approach to a turbulent economic climate, particularly over the past several months, according to Shilpa Mishra (pictured top), …
Interest rates, inflation weighing down on consumer spending: RBC
Elevated policy rates and tight financial conditions continue to hamper consumer spending in developed economies like Canada, according to a new analysis by RBC Economics. “Evidence is mounting that economic activity is softening and that inflation will continue to slow,” RBC said. “Central banks are willing to step in again to bring inflation under control.” At this point, however, additional hikes are looking much less likely, “particularly in Canada where key indicators like per-capita GDP, and the unemployment rate are already tracking closely to early stages of historical recessions,” RBC stressed. A major element that will determine the Bank of Canada’s …
BoC to begin rate cuts by 2024’s second quarter, market players say
Canadian market players are anticipating that the central bank will begin cutting its benchmark policy rate on April 2024, according to a new survey by the Bank of Canada. The much-expected retreat from the rate’s 22-year high of 5% will start a month later than previous consensus forecasts, the BoC said. The median projection of the poll of 27 financial market players pegged interest rates declining to 4% in Q4 2024. The median inflation projection pegged a drop to 2.2% by the end of 2024, coupled with a 1.2% annual increase in the gross domestic product. In its recently released preliminary …
Canada’s unemployment rate rises again
Canada’s unemployment rate ticked higher in October, rising to 5.7% as the national economy continued to cool. New figures released by Statistics Canada showed that the labour market added 18,000 jobs last month in a clear sign that the Bank of Canada’s efforts to tap the brakes on economic growth are having an impact. The October jobs figures mean that the national unemployment rate has now increased four times in the past six months, with last month’s rate up from 5.5% in September. Employment fell in wholesale and retail trade and manufacturing last month, while construction and information and culture …
