'The lack of affordability is pinching:' Bank of Canada expected to cut Wednesday amid signs of softening economy
Economists widely expect the Bank of Canada to cut its policy rate for the second consecutive time on Wednesday after data released the past month suggested the Canadian economy is feeling the pinch of higher rates.
“I think the bank is going to cut again,” said Jeremy Kronick, director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute. “I think if you look the evidence that’s come since they made the announcement to cut in June, I think it’s pretty indicative of a softening economy.”
The unemployment rate jumped to 6.4 per cent in June, discretionary consumer spending continues to decline and retail trade data released on Friday showed a decrease of 0.8 per cent compared to the month before, with sales down in eight of the nine subsectors.
“Things are fairly contained, and you can see how the lack of affordability is pinching,” said Jimmy Jean, chief economist at Desjardins Group. “You take all this together and it’s clear this is an economy that is still struggling and that’s really what the Bank of Canada wants to confirm.”
The inflation rate unexpectedly ticked up to 2.9 per cent in May, before easing down in June to 2.7 per cent. Core inflation, the measures the central bank prefers to assess when making its monetary policy decisions, ticked down last month, but the three-month annualized average jumped slightly.
Some components in the inflation basket remain sticky, including the cost of services, which grew by 4.8 per cent year-over-year in June, up from 4.6 per cent reported in May. This acceleration was driven mainly by wage growth, which is expected to decline.
“Wages are still looking overheated, but in line with what the bank’s Business Outlook Survey showed, they should cool next year
Read more on financialpost.com
