Posthaste: These 3 charts bolster case for bigger Bank of Canada rate cuts, says economist
The chatter around the Bank of Canada supersizing its next cut has grown in volume ever since the United States started its interest rate trimming campaign with a jumbo reduction.
Some economists said the Fed’s 50-basis-point cut blew “the doors wide open” for the Canadian central bank to cut by a similar magnitude because it could make the difference between a soft economic landing and a recession.
Meanwhile, currency analysts at CIBC Capital Markets said interest rates remained too restrictive and that a compelling argument exists for them to come down in larger increments than the standard 25 basis points per meeting.
One economist said more evidence has built up that interest rates need to come down faster, noting that Canada’s small-business sector is flashing all kinds of warning signs, as are other data points.
Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said the latest CFIB Business Barometer, released on Sept. 26, showed “worrying signs” regarding the state of commerce for small firms.
“Although the CFIB Business Barometer covers only small firms, in recent years, the survey indicators have provided a fairly accurate steer to economic conditions,” he said in an analysis.
The barometer fell to 55 in September from 56.8 the month before, still over the 50 no-change mark, but Brown said the reading points to annualized gross domestic product (GDP) of roughly one per cent in the third quarter, well off the Bank of Canada forecast of 2.8 per cent.
“The details were downbeat,” he said, adding that the number of small businesses experiencing “insufficient demand” rose to 53.3 per cent last month.
“That seems to suggest that the output gap (the difference between what an economy is
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