Goodbye 'hawkish bias': Here's when economists think the Bank of Canada will cut rates
The Bank of Canada held its benchmark interest rate at five per cent for the fourth consecutive time on Jan. 24. Here’s what economists, who widely expected the bank to hold, had to say about the announcement and when Canadians can expect a rate cut from the central bank.
“The big change in the policy statement was that the bank dropped its bias toward more tightening,” said Stephen Brown, deputy chief North America economist at Capital Economics, in a note following the rate announcement.
He is interpreting that to mean Bank of Canada governor Tiff Macklem is edging closer to making his first rate cut, though “there was no sign that cuts are imminent,” Brown said.
The central bank could be of the mind now that inflation isn’t as bad as the headline numbers might suggest, Brown added, noting that the bank’s statement referenced the “outsized role” shelter costs — mortgage interest costs and rents — are having on the consumer price index.
At this stage, the central bank still believes the Canadian economy can avoid a recession and is calling for 2024 GDP of 0.8 per cent. However, Brown believes the bank is overestimating growth and that will force Macklem to shift to cuts sooner than expected.
“Given the shift in tone today, we are sticking to our view that the bank will be prepared to make policy less restrictive by beginning to cut interest rates at the April policy meeting,” Brown said.
Avery Shenfeld, chief economist at CIBC World Markets, noted that the bank dropped its language regarding the need to hike rates again if inflation persisted, replacing that “hawkish bias” with the more cut-friendly wording that it remains “concerned” about persistent core inflation.
Shenfeld highlighted that the bank is forecasting
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