The Bank of Canada is preparing for its next interest rate announcement, but will it follow many of its global peers and make a cut?
Recent opinion has suggested that Canada’s central banks will not follow the global trend and will instead hold pat on interest rates, possibly until late 2020.
But two leading economists believe that the meeting on September 4 will bring a rate cut due to trade and political issues that may warrant an earlier move.
Concordia University professor Moshe Lander and Atif Kubursi, president of Econometric Research, are in the minority among a panel of economists and housing market experts convened by comparison site Finder.com.
They point to the slowing US economy; economic troubles in the UK, China, and Germany; and the federal election; as factors that could tip Governor Stephen Poloz and his team to cut rates.
The other 10 members of the panel believe that the BoC will keep rates on hold, but a total of 4 think the bank should make a cut. All agree that its next move, whenever that comes, will be a reduction.
“Domestic economic conditions do not warrant a change in the Bank of Canada’s target overnight rate at this stage: inflation is at target, real policy rates are negative, the housing market is strengthening, household credit growth is firming, and wage growth is very strong,” said Brett House, deputy chief economist at ScotiaBank.
Could the BoC follow some of its peers and cut to negative interest rates?
“Whenever the next recession comes, the Bank of Canada should set a negative interest rate,” said Angelo Melino, professor at the University of Toronto.
And there could also be some other less common monetary policies ahead if recession bites.
“If the economy experienced a significant downturn, the Bank could possibly find itself turning to more unconventional monetary tools such as quantitative easing,” said Alicia MacDonald, principal economist at the Conference Board of Canada.
The full report is at https://www.finder.com/ca/bank-of-canada-interest-rate-forecast