Posthaste: Don't count Bank of Canada rate cut in March out just yet
The Bank of Canada faces an especially tough decision when the Governing Council meets on March 12.
Not only are U.S. President Donald Trump‘s tariff threats hanging over the economy, but recent data have suggested that the economy — and inflation — are picking up speed.
After a stronger than expected consumer price index reading for January, Canada’s unemployment rate dropped for the second month in a row when job growth tripled expectations.
Three weeks ago markets had fully priced in a 25-basis-point cut for March 12, but since then the odds have shrunk to 25 per cent.
Not all economists, however, agree with the market’s assessment.
“Naturally, these developments leave forecasts for a 25 bp cut next month on shakier footing but there are still some compelling reasons to expect a cut,” said National Bank of Canada economist Taylor Schleich in a report entitled “An increasingly contrarian take …”
Schleich points to the Bank of Canada’s last monetary policy report just three weeks ago, when it said that there were no signs that inflationary pressures were broad-based and even suggested that its preferred indicators were sending a false signal.
The bank also indicated in that report that the jobs market remained soft and members would have to see jobs gains outpacing labour force growth for a longer period to be convinced it was on solid footing.
Schleich has his doubts that January’s 76,000 job gains will change the bank’s mind, when other indicators are showing a different picture.
Hiring intentions are still below historical averages, the job vacancy rate is at a seven-year low and the Survey of Employment, Payrolls and Hours is signalling the opposite of what the Labour Force Survey suggests, he said.
“To be clear, we
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