Economists and industry observer polled by Finder have unanimously predicted that the Bank of Canada will keep the interest rate on hold.
The central bank’s December 4 meeting will be the latest in a series of conclaves maintaining the rate at 1.75%. A major driver of the decision is the impact of political volatility worldwide on Canada.
“The Bank of Canada is watching closely for signs that global uncertainty is bleeding into the Canadian economy more broadly, particularly consumer spending and housing markets. So far, we’ve seen little change in the trends in these sectors, suggesting that the Bank will be happy to stand pat in December,” TD Economics senior economist Brian DePratto stated.
“The Canadian economy continues to show signs of stress, but with so little room for interest rate cuts, the economy is not stressed enough to warrant using one of those cuts at this time,” Concordia University professor Moshe Lander added.
Scotiabank deputy chief economist Brett House noted that recent statements by BoC governor Stephen Poloz were indicative of the bank’s next steps.
“After turning incrementally more dovish on 30 October in the Bank of Canada’s rate decision and surrounding communications, on 21 November Gov. Poloz provided fairly explicit forward guidance–despite his general aversion to prejudging outcomes–that the December meeting would see the Bank keep rates on unchanged,” House explained. “Poloz most importantly noted that, ‘We think we have monetary policy conditions about right.’ As a result, we have pushed our forecast of cuts into Q1 and Q2 2020.”
RBC senior economist Josh Nye also predicted a rate cut early next year.
“With growth likely driven by consumer spending and housing activity, we think the BoC will see enough evidence of resilience on the household side to opt against lowering rates. That said, business investment and trade are likely to be soft, and a continuation of those trends toward the end of the year would test the BoC’s patience.”