What the experts expect from the Bank of Canada rate decision today
The Bank of Canada’s next interest rate decision is pretty much baked in as a “hold” as far as economists and markets are concerned although one expert warns that the governor Tiff Macklem should not treat “this week’s communications as a mere placeholder.”
Most economists, in pre-meeting notes, said they will be scanning the central bank’s statement on the Dec. 6 decision for signs that its view of the economy and inflation is shifting.
In a speech on Nov. 22, Macklem said that “higher interest rates have cooled the overheated economy and taken the steam out of inflation,” adding that he believes the central bank may have done enough to tame the consumer price index.
He did reiterate that the central bank is prepared to raise rates again if inflation persists.
Canada reported GDP last week that showed growth contracted 1.4 per cent in the third quarter on an annualized basis, “adding to evidence that the economy is softening,” Royal Bank of Canada economists Nathan Janzen and Claire Fan said in a note.
Inflation fell to 3.1 per cent last month from a high of 8.1 per cent in June 2022.
Still, Derek Holt with Scotiabank Economics cautioned in a note on Dec. 5 that investors are already betting there is a “significant probability” the bank will cut at its Jan. 24 meeting.
“A mere indifferent shrug of the shoulders this week could leave the BoC vulnerable to runaway cut pricing over the ensuing seven long weeks,” Holt said, suggesting the bank will adopt hawkish messaging to ward off such a reaction.
Here’s what economists say about the looming Bank of Canada rate decision.
“We expect the Bank of Canada (BoC) to remain on hold with the overnight rate at five per cent. The economy remains weak as shown by the GDP contraction
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