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CTV News
2 days ago
- Business
- CTV News
Bank of Canada widely expected to hold key rate steady amid trade uncertainty
The Bank of Canada is set to deliver an interest rate decision on Wednesday. Bank of Canada Governor Tiff Macklem is seen during a news conference, in Ottawa, Wednesday, June 4, 2025. THE CANADIAN PRESS/Adrian Wyld OTTAWA — Avery Shenfeld doesn't think the Bank of Canada will cut its benchmark interest rate at its decision on Wednesday, but if it does, he said it will be a 'pleasant surprise.' 'There's always a chance that they'll surprise with the rate cut,' the chief economist of CIBC said. 'But I'm not holding out that much hope.' Most economists are also expecting the Bank of Canada will hold its policy rate steady at 2.75 per cent for a third consecutive decision later this week. As of Friday afternoon, financial markets were placing odds of a quarter-point rate cut on Wednesday at just seven per cent, according to LSEG Data & Analytics. Stubbornness on the inflation front and surprise strength in the labour market have quashed arguments for further easing since the central bank's June decision. The Canadian economy gained an unexpected 83,000 jobs in June, Statistics Canada reported earlier this month, driving the unemployment rate lower for the first time since January. A few days later, StatCan reported annual inflation ticked up to 1.9 per cent last month while the Bank of Canada's closely watched core inflation figures held stubbornly around three per cent. 'Overall, sticky inflation readings, a weakening but relatively resilient economic backdrop and prospects for larger fiscal spending are reasons why we do not expect the BoC will cut again in this cycle,' RBC economists Claire Fan and Abbey Xu wrote in a note Friday. But Shenfeld's call for a lower policy rate — CIBC expects two more quarter-point drops before the Bank of Canada is done — isn't based on what's happened in the economy, it's about what's on the horizon. Outside of the June jobs jump, the labour market is still broadly weak with the unemployment rate at 6.9 per cent, Shenfeld noted. He also expects Canada's tariff dispute with the United States led to an economic contraction in the second quarter of the year. All told, there's enough 'slack' building in the economy to take steam out of inflation in the months to come, Shenfeld said. The Bank of Canada's own second-quarter business outlook survey released last week suggests that many firms are opting to absorb higher costs from tariffs, rather than pass them on to consumers who may be reining in spending amid economic uncertainty. Shenfeld said that's a sign that tariff impacts 'won't extend into a more persistent inflation issue.' He said that once the central bank gains enough confidence that any tariff-induced inflation pressures will be short-lived, monetary policymakers should feel confident enough to lower interest rates. 'I think at this point they know enough to rule out the worst-case scenario on trade,' Shenfeld said. Bank of Canada governor Tiff Macklem has explicitly said monetary policymakers are being less forward-looking than usual in the trade war. The central bank didn't publish a traditional forecast for the economy in its April monetary policy report, instead offering two scenarios for how tariffs could hit the economy. Jimmy Jean, chief economist at Desjardins, said he believes the Bank of Canada will have gathered enough clarity on the trade front to return to formal forecasts in this week's MPR. 'The uncertainty is there for everyone to recognize. But there's a point where you've got to sort of, stick your neck out and make the proper caveats,' Jean said. Tariff deadlines continue to hover over the Bank of Canada's head — U.S. President Donald Trump has threatened to levy tariffs of 35 per cent on Canadian imports starting Friday if a trade deal isn't reached before then, though CUSMA-compliant goods are expected to be exempt from the duties. Some forecasters, including RBC, expect the Bank of Canada is already done rate cuts and will turn the job of stimulating the economy through the trade war over to federal and provincial governments. While Jean also believes the central bank will opt to hold rates again on Wednesday, he said the bank's next decision in September is an 'open possibility' for a cut. Trump's sectoral tariffs targetting Canada's steel, aluminum and copper industries are of particular concern for Ontario and Quebec, Jean said. If those tariffs are sustained, he argued more rate cuts from the Bank of Canada will be warranted to cushion the economic hit. In addition to some sector-specific relief, the federal government has moved in recent months to ramp up Canada's defence and infrastructure funding — spending that could offer fiscal, rather than monetary, support for the economy. But Jean said Desjardins is expecting that lift to come over the ensuing years, not months, opening a window for the Bank of Canada to lower rates in the near-term. 'We think, despite those measures being in the pipeline, the Bank of Canada will still in September have a valid reason to cut interest rates,' he said. This report by The Canadian Press was first published July 28, 2025. Craig Lord, The Canadian Press
Hamilton Spectator
7 days ago
- Business
- Hamilton Spectator
Bank of Canada's next interest rate decision is on July 30. Here's what economists expect
There's not much expectation the Bank of Canada will make any changes to interest rates in the next rate announcement set for Wednesday, July 30. In addition to the lending rate announcement, a policy report is expected as well. The interest rate has remained at 2.75 per cent since March. It's a figure used as a base for mortgage and loan lenders to calculate their interest rate repayment levels. According to Statistics Canada's latest report, the inflation rate for June was 1.9 per cent — which is around the level Bank of Canada Governor Tiff Macklem hopes to keep it at. But economists are still keeping an eye on inflation, as tariffs imposed by the United States are anticipated to start playing a role on those. 'As Consumer Price Index inflation heats up and keeps the bank on pause, the bank will be watching inflation expectations closely,' BMO vice-president of economics Shelly Kaushik said in a news release . 'Tariffs continue to put pressure on input price inflation, which is expected to accelerate over the next 12 months.' 'Tariffs and related uncertainty, along with spillover effects on the Canadian and global economies, continue to have major impacts on businesses' outlooks,' the bank said in a July 21 news release . 'However, the worst-case scenarios that firms envisioned last quarter are now seen as less likely to occur.' Most businesses were bracing to see an impact, and for some it has happened, but for other companies, it hasn't materialized, the bank added. According to Kaushik, there's not much in the latest Canadian business and economic forecast to sway the bank to change its rates next week. But TD Economics predicts two more rate cuts could happen this year, though the exact timing is up in the air. 'The ongoing softness in the labour market should open the door for the BoC to cut interest rates two more times this year, despite the recent uptick in inflation,' TD said in a June news release . In previous announcements, Macklem has said the bank will be more cautious with its interest rate changes in the coming months. 'The Canadian economy is showing some resilience to tariffs,' Macklem said last month. 'Yes, consumption was softer in the first quarter. You can see the impact of tariffs on consumption. But despite a really big drop in consumer confidence, consumer spending did continue to grow in the first quarter, and business investment was actually a bit stronger than we expected.' Macklem noted there was a lot of uncertainty, and he would keep an eye on the public data and the impact of tariffs in the country. Visit to learn more about the upcoming announcement. Error! Sorry, there was an error processing your request. There was a problem with the recaptcha. Please try again. You may unsubscribe at any time. By signing up, you agree to our terms of use and privacy policy . This site is protected by reCAPTCHA and the Google privacy policy and terms of service apply. Want more of the latest from us? Sign up for more at our newsletter page .
CTV News
21-07-2025
- Business
- CTV News
Firms less worried by worst-case tariff scenarios, BoC says
Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference at the Bank of Canada in Ottawa on Wednesday, March 12, 2025. THE CANADIAN PRESS/Sean Kilpatrick
Yahoo
13-07-2025
- Business
- Yahoo
Economists expect inflation ticked up in June after surprise jobs gain
OTTAWA — Economists expect the pace of inflation picked up in June as the Bank of Canada continues to search for tariff impacts in the price data. Statistics Canada is set to report consumer price index data for June on Tuesday. CIBC expects the release will show the annual pace of inflation rose a tenth of a percentage point to 1.8 per cent. Katherine Judge, CIBC's senior economist, said in an interview that she expects goods inflation was fuelling price pressures in the month. Some of that can be tied to the impact of Canada's tariff dispute with the United States, she said. On the opposite end, Judge is looking for relief on rental prices to help take some of the steam out of shelter inflation. "The rent index has not yet picked up drops in rents that we've seen for vacant units across the country, so that's something that will partly offset tariff impacts," she said. The June CPI release will be the Bank of Canada's last look at inflation before its next interest rate decision set for July 30. Financial markets are broadly expecting the central bank to hold its policy rate steady for a third consecutive time at that meeting. LSEG Data & Analytics reported that odds of a quarter-point cut dropped to just 13 per cent as of Friday afternoon after StatCan reported an unexpected gain of 83,000 jobs in June. Tiff Macklem, the governor of the central bank, said last month that monetary policymakers were noticing some "unusual volatility" in the inflation figures. He also said underlying inflation could be "firmer" than the central bank first thought, and might be reflecting higher costs from tariffs between Canada and the United States. Royal Bank of Canada expects the annual pace of inflation accelerated to 1.9 per cent in June. RBC senior economist Claire Fan said she's expecting core inflation will still be stubborn in June — hovering at the top end of the central bank's target band of one to three per cent. She said food inflation is one area that RBC expects will continue to push up the consumer price index. While the Bank of Canada and other economic watchers have been scouring price data for evidence of pressure from the U.S. trade dispute, Fan said she's not expecting "a lot of tariff impact to show up yet." Inflation data is also backward-looking by nature, so Fan said she's leaning more on the Bank of Canada surveys of businesses and consumers set for next week. These quarterly surveys give the central bank a sense of how businesses are handling tariff pressures and how quickly they might pass costs along to consumers. Deputy governor Sharon Kozicki signalled in a speech last month that the Bank of Canada is relying more on alternative data sources such as surveys and restaurant reservations to cut through some of the uncertainty in traditional economic data. "It's a very limited amount of our data that we're seeing on inflation right now, but the (business outlook) survey historically has been a really useful gauge of future expectations," Fan said. Judge said that while she would normally put more weight on the CPI data, she argued StatCan's surprisingly strong June jobs report will likely put the central bank on hold until September. Benjamin Reitzes, BMO's managing director of Canadian rates and macro strategist, said in a note Friday that he expects headline inflation rose to two per cent in June. He pointed to rising food and transportation costs, and less rosy comparisons to last year's price data, as driving the acceleration. Noting that the breadth of inflation widened in the May CPI figures, Reitzes said the Bank of Canada will be looking for signs of a reversal last month to restore confidence that price pressures could be easing. "Following the huge June job gain, it will take an outsized move lower in underlying inflation for the BoC to even consider cutting in July," he wrote. This report by The Canadian Press was first published July 13, 2025. Craig Lord, The Canadian Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
National Post
22-06-2025
- Business
- National Post
Uncertainty reigns as trade tensions, tax shifts cloud Bank of Canada's inflation outlook
The Bank of Canada will get a fresh look at national inflation figures this week — a picture that's been particularly murky as of late amid tax changes and trade wars. Article content Statistics Canada is expected to publish its consumer price index for May on Tuesday. Article content Article content Financial data shows the consensus among economists is that inflation ticked up to 1.8 per cent year-over-year last month. Article content Article content April figures showed the annual inflation rate slowed sharply to 1.7 per cent, thanks largely to a drop in gasoline prices tied to the end of the consumer carbon price. Article content Article content Benjamin Reitzes, BMO's managing director of Canadian rates and macro strategist, said he expects inflation cooled two ticks to 1.5 per cent in May. He pointed to a slowing in shelter inflation and a smaller jump in gas prices compared with the same time last year for the easing. Article content But it won't be just the headline number the Bank of Canada is parsing as it attempts to set its benchmark interest rate in an increasingly uncertain world. Article content 'The reality is, they don't just look at one number. They look at a number of different inflation metrics to really try and figure out what the underlying trend is,' Reitzes said. Article content Bank of Canada governor Tiff Macklem called the current inflation picture 'complicated' in a speech to the St. John's Board of Trade in Newfoundland and Labrador on Wednesday. Article content The 'firmness' in underlying inflation lately might be early signs of the trade war with the United States impacting inflation, he said. Article content Article content The central bank has so far been dogged by uncertainty tied to the tariff dispute, holding its policy rate steady at 2.75 per cent twice in a row as it waits for clarity on how the trade restrictions will impact inflation. Article content Article content While the tariffs and counter-tariffs themselves are likely to drive up prices for businesses, it's not yet clear to the bank how quickly companies will pass those costs on to customers.
