Hoping for an interest rate cut? You might have a long wait

by Steve Randall13 Aug 2019

In the current climate of political tension and trade disputes there are no certainties and the global economy is looking increasingly fragile, but while many central banks are cutting rates, the BoC looks set to stand firm.

A panel of economists polled by Bloomberg suggests that Governor Poloz and his team will resist the growing trend for rate cuts and keep Canada’s overnight rate at 1.75%.

And they are not just expecting that to be the case in the short term; most believe there will be no change in interest rates until the end of 2020 at the earliest.

Canada’s economy is faring well and providing some expectation-beating results, helping to inform the economists’ view that a change of policy is less likely.

“Poloz will need to see a substantial weakening in domestic data before the bank changes its stance,” Dominique Lapointe, an economist at Laurentian Bank, told Bloomberg. “The extent to which global tensions translate into lower business investment and exports in Canada has yet to be seen.”

Rate cut?

Nine of the 15 economists polled by Bloomberg are forecasting a hold-steady on rates until the end of 2020 with those from some leading Canadian banks – including TD, BMO, Laurentian, and National Bank - most optimistic of that.

The other six economists believe there will be a rate cut in the next year as global demand pressures Canadian exports and the risk of weakening investment grows.

RBC and CIBC economists both expect an interest rate cut in the first quarter of 2020 while Capital Economics is calling for a 1% rate by the end of next year.

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