Posthaste: Why Bank of Canada rate hikes might really be over this time
It looks like British Columbia Premier David Eby might get his wish.
In a letter last week, the premier urged Bank of Canada governor Tiff Macklem to consider the “human impact” and halt any further interest rate hikes.
“People in B.C. are already hurting,” he wrote. “In your role as governor, I urge you to consider the full human impact of rate increases and not further increase rates at this time.”
Friday’s data on Canada’s economy may have done the job for him.
The contraction in second-quarter gross domestic product and flat estimate for July was a shock that prompted some economists to firm up their predictions for a rate pause on Sept. 6 — and others to call an end to hiking altogether.
GDP shrank 0.2 per cent in the second quarter, well below the Bank of Canada’s forecast of 1.5 per cent and economists’ estimates of 1.2 per cent. Statistics Canada also revised first-quarter growth down to 2.6 per cent.
“We had anticipated to see signs of a slowdown in Canada, but these figures were shockingly weak,” wrote Jay Zhao-Murray, an analyst at Monex Canada after the data came out.
“Virtually all remaining risk of a September hike was priced out by money markets, while the odds of a hike at any point by year-end was slashed to one in three.”
Granted, some of the economic drags were temporary. Record wildfires in Canada this season led to declines in mining, oil and gas, rail transportation and even hotel services. If activity in these areas had been unchanged GDP would have grown by 0.3 per cent, said Capital Economics’ Stephen Brown.
But even without the fire damage, the economy was slower than the bank had expected, he said. The fires would have had little effect on housing investment, for example, which dropped 8.2 per
Read more on financialpost.com
