‘A big green light to cut’: What to expect from the Bank of Canada this week
The Bank of Canada is set to deliver its next interest rate decision on Wednesday as many economists and market watchers expect a second consecutive cut in borrowing costs.
The central bank’s hotly anticipated decision comes as new polling shows Canadians struggling with debt loads are clamouring for interest rate relief.
As of Monday, market odds were almost fully pricing in a 25-basis-point interest rate cut this week that would bring the benchmark rate down to 4.5 per cent.
That comes after the Bank of Canada last month delivered its first rate cut in more than four years. Tiff Macklem, the head of the central bank, said then that Canadians can expect a gradual pace of rate cuts going forward, with monetary policymakers watching the data carefully heading into each rate meeting.
It was the latest inflation data from June released last week that “sealed the deal” for another rate cut on Wednesday, according to Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO.
After a slight bump in Statistics Canada’s inflation reading for May, price pressures showed signs of easing again in June, coming in at 2.7 per cent annually. Core inflation, closely watched by the Bank of Canada, also showed some signs of cooling.
In addition to good news on the inflation front, the Bank of Canada has seen further signs of slowing in the Canadian labour market and retail sales, which Reitzes said in a brief note Monday should give the central bank confidence that economic conditions are right for further price cooling.
“That gives the (Bank of Canada) a big green light to cut this week,” he wrote.
Jeremy Kronick, associate vice-president and director of the Centre on Financial and Monetary Policy at the CD Howe
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