With the next Bank of Canada interest rate just hours away (Wednesday morning), here are some excerpts of what some knowledgeable people in the financial world told the Globe and Mail…
CIBC economist Avery Shenfeld:
“Markets have thrown down their 50 basis point chip on the poker table, betting that the Bank of Canada will deliver an interest rate cut of that magnitude…but will the central bankers call that bet, or raise to 75? While a mega-move isn’t our base-case forecast, there are reasons to think that Governor [Tiff] Macklem’s team will give such a move more consideration than the 25 basis point cut that some economists are still projecting.”
Douglas Porter, chief economist with BMO Capital Markets:
“It’s a close call, but we suspect that the big improvement in inflation, the still-high unemployment rate, and the still-sour consumer and business sentiment will be enough to prompt the Bank of Canada to opt for a 50 bp rate cut later this month. After all, the BoC has dovishly signalled that they are now more concerned about downside risks to the economy and the possibility that inflation may drop too low.”
Claire Fan, economist, Royal Bank of Canada:
“With the third quarter release of the BOS survey last Friday that pointed to further unwinding in inflation pressures in the future, we think there’s little reason for the BoC to turn their worries back from a weakening economy to inflation, and expect them to go ahead with cutting by 50 bps.”
Derek Holt, vice-president, Scotiabank Economics:
"The Bank of Canada is likely to cut 50bps…on the heels of a report that shows that the Bank’s preferred core measures are on target…opting to cut 50bps and the aggressive market easing around the expected path forward are likely to ignite growth faster over 2025–26 than otherwise, closing the output gap quicker than estimated along ongoing other sources of inflation risk from real wage gains alongside terrible productivity, severe housing shortages and ongoing immigration, likely fiscal pump-priming into an election year, and our work on the pent-up demand and pent-up savings that exist in the household sector.”
David Rosenberg, founder of Rosenberg Research:
“At 4.25%, the BoC rate is still around 150-200 basis points north of neutral and, given where inflation and the unemployment are, the BoC is well behind the curve, and there should really be nothing to stand in the way of a 50 basis point rate cut.”
Charles St-Arnaud, chief economist, Alberta Central (credit union):
“We think the BoC will cut its policy rate by 50bp at the October meeting, by another 50bp at the December meeting and by 25bp in January. This would bring the policy rate to 3.00%, about the upper range of the BoC’s estimate of neutral.”
CIBC economist Avery Shenfeld:
“Markets have thrown down their 50 basis point chip on the poker table, betting that the Bank of Canada will deliver an interest rate cut of that magnitude…but will the central bankers call that bet, or raise to 75? While a mega-move isn’t our base-case forecast, there are reasons to think that Governor [Tiff] Macklem’s team will give such a move more consideration than the 25 basis point cut that some economists are still projecting.”
Douglas Porter, chief economist with BMO Capital Markets:
“It’s a close call, but we suspect that the big improvement in inflation, the still-high unemployment rate, and the still-sour consumer and business sentiment will be enough to prompt the Bank of Canada to opt for a 50 bp rate cut later this month. After all, the BoC has dovishly signalled that they are now more concerned about downside risks to the economy and the possibility that inflation may drop too low.”
Claire Fan, economist, Royal Bank of Canada:
“With the third quarter release of the BOS survey last Friday that pointed to further unwinding in inflation pressures in the future, we think there’s little reason for the BoC to turn their worries back from a weakening economy to inflation, and expect them to go ahead with cutting by 50 bps.”
Derek Holt, vice-president, Scotiabank Economics:
"The Bank of Canada is likely to cut 50bps…on the heels of a report that shows that the Bank’s preferred core measures are on target…opting to cut 50bps and the aggressive market easing around the expected path forward are likely to ignite growth faster over 2025–26 than otherwise, closing the output gap quicker than estimated along ongoing other sources of inflation risk from real wage gains alongside terrible productivity, severe housing shortages and ongoing immigration, likely fiscal pump-priming into an election year, and our work on the pent-up demand and pent-up savings that exist in the household sector.”
David Rosenberg, founder of Rosenberg Research:
“At 4.25%, the BoC rate is still around 150-200 basis points north of neutral and, given where inflation and the unemployment are, the BoC is well behind the curve, and there should really be nothing to stand in the way of a 50 basis point rate cut.”
Charles St-Arnaud, chief economist, Alberta Central (credit union):
“We think the BoC will cut its policy rate by 50bp at the October meeting, by another 50bp at the December meeting and by 25bp in January. This would bring the policy rate to 3.00%, about the upper range of the BoC’s estimate of neutral.”