Last week, the odds were 50-50 the bank would lower its overnight rate but new economic data have increased the chances of a cut.On Friday, Statistics Canada (StatCan) said the Canadian economy grew in the first quarter of 2024 at an annualized rate of 1.7%, slower than the 2.5% expected by the agency at the beginning of the year and lower than the 2.8% expected by most economists. StatCan cited higher household spending on rent, telecom and air travel as contributors to the lower than forecasted increase, adding household saving reached 7%, a two-year high. Real GDP (gross domestic product) declined in the first quarter, the sixth decline in the last seven quarters. In a note to clients on Friday, BMO chief economist Doug Porter said the StatCan report indicates a slowing economy that’s growing “well short of potential,” adding it “modestly” increases odds for a rate cut on Wednesday. “There are respectable arguments on both sides of the decision, but we believe the balance of evidence points to a cut,” he said. Also on Friday, money markets hiked bets on a rate cut to 80% after the GDP data release, up from 66%, reported Reuters. A report from RBC Economics says the door has been opened for the bank to cut its rate by .25% to 4.75%, following recent cuts from the Swiss National Bank and the Riksbank (central bank of Sweden). “Evidence has continued to build that the current high level of interest rates is no longer needed. The Canadian economy has softened significantly,” says RBC. “Gross domestic product per capita posted another decline in Q1 this year. Inflation pressures have also slowed with the closely watched three-month growth rate (annualized) in the (bank’s) preferred median and trim core consumer price index measures both running below the 2% inflation target in April.” Tu Nguyen, an RSM economist, said in a statement on Friday the bank could wait to see signs of an easing in wage growth before cutting the rate, but said a rate hold on Wednesday would be “unnecessarily restrictive” given the signs of easing in the economy. “An interest rate cut of a quarter percentage point would not be enough to thwart the central bank’s efforts to date in getting inflation back to the Bank of Canada’s two per cent target,” said Nguyen, adding the GDP data is part of a “mountain of evidence that a rate cut should come (on Wednesday).” James Orlando, director and senior economist at TD Bank said in a note recent data puts the bank in a position to justifiably cut the rate, however Bank of Canada Governor, Tiff Macklem has not given definite enough signals the governing council is ready to act. “This central bank has prided itself on communicating its intentions to make changes to monetary policy ahead of an actual move, Orlando wrote. “If it wants to keep up this effort of transparency and forward guidance, we expect the BoC will hold rates steady and use the meeting to tee-up a rate cut in July,” Orlando wrote. “While the case for interest rate cuts in Canada is relatively clear, the BoC will likely maintain a cautious tone about the pace of additional cuts after (Wednesday’s announcement),” said RBC. “Governor Macklem has mentioned a few areas where price pressures could still resurface. That includes higher energy prices driven by global geopolitical conflicts, and faster increases in wages and/or home prices domestically.” “Contingent on that outlook, we look for 100 basis points of interest rate cuts this year that will leave the overnight rate at a still restrictive 4% by the end of 2024.” The rate announcement will be made on Wednesday at 8 am MDT. .This is what the Western Standard is up againstThe Trudeau government is funding lies and propaganda by directly subsidizing the mainstream media. They do this to entrench the powerful Eastern, woke and corrupt interests that dominate the political, social and economic institutions in Canada. Federal authorities are constantly trying to censor us and stop us from publishing the stories that they don’t want you to read. Ottawa may weaponize our taxes and police against us, but we’ve got a powerful ally on our side.You. Free men, and free women. We need you to stand with us and become a member of the Western Standard. Here’s what you will get for your membership:Unlimited access to all articles from the Western Standard, Alberta Report, West Coast Standard, and Saskatchewan Standard, with no paywall. Our daily newsletter delivered to your inbox. .Access to exclusive Member-only WS events.Keep the West’s leading independent media voice strong and free.If you can, please support us with a monthly or annual membership. It takes just a moment to set up, and you will be making a big impact on keeping one the last independent media outlets in Canada free from Ottawa’s corrupting influence.
Last week, the odds were 50-50 the bank would lower its overnight rate but new economic data have increased the chances of a cut.On Friday, Statistics Canada (StatCan) said the Canadian economy grew in the first quarter of 2024 at an annualized rate of 1.7%, slower than the 2.5% expected by the agency at the beginning of the year and lower than the 2.8% expected by most economists. StatCan cited higher household spending on rent, telecom and air travel as contributors to the lower than forecasted increase, adding household saving reached 7%, a two-year high. Real GDP (gross domestic product) declined in the first quarter, the sixth decline in the last seven quarters. In a note to clients on Friday, BMO chief economist Doug Porter said the StatCan report indicates a slowing economy that’s growing “well short of potential,” adding it “modestly” increases odds for a rate cut on Wednesday. “There are respectable arguments on both sides of the decision, but we believe the balance of evidence points to a cut,” he said. Also on Friday, money markets hiked bets on a rate cut to 80% after the GDP data release, up from 66%, reported Reuters. A report from RBC Economics says the door has been opened for the bank to cut its rate by .25% to 4.75%, following recent cuts from the Swiss National Bank and the Riksbank (central bank of Sweden). “Evidence has continued to build that the current high level of interest rates is no longer needed. The Canadian economy has softened significantly,” says RBC. “Gross domestic product per capita posted another decline in Q1 this year. Inflation pressures have also slowed with the closely watched three-month growth rate (annualized) in the (bank’s) preferred median and trim core consumer price index measures both running below the 2% inflation target in April.” Tu Nguyen, an RSM economist, said in a statement on Friday the bank could wait to see signs of an easing in wage growth before cutting the rate, but said a rate hold on Wednesday would be “unnecessarily restrictive” given the signs of easing in the economy. “An interest rate cut of a quarter percentage point would not be enough to thwart the central bank’s efforts to date in getting inflation back to the Bank of Canada’s two per cent target,” said Nguyen, adding the GDP data is part of a “mountain of evidence that a rate cut should come (on Wednesday).” James Orlando, director and senior economist at TD Bank said in a note recent data puts the bank in a position to justifiably cut the rate, however Bank of Canada Governor, Tiff Macklem has not given definite enough signals the governing council is ready to act. “This central bank has prided itself on communicating its intentions to make changes to monetary policy ahead of an actual move, Orlando wrote. “If it wants to keep up this effort of transparency and forward guidance, we expect the BoC will hold rates steady and use the meeting to tee-up a rate cut in July,” Orlando wrote. “While the case for interest rate cuts in Canada is relatively clear, the BoC will likely maintain a cautious tone about the pace of additional cuts after (Wednesday’s announcement),” said RBC. “Governor Macklem has mentioned a few areas where price pressures could still resurface. That includes higher energy prices driven by global geopolitical conflicts, and faster increases in wages and/or home prices domestically.” “Contingent on that outlook, we look for 100 basis points of interest rate cuts this year that will leave the overnight rate at a still restrictive 4% by the end of 2024.” The rate announcement will be made on Wednesday at 8 am MDT. .This is what the Western Standard is up againstThe Trudeau government is funding lies and propaganda by directly subsidizing the mainstream media. They do this to entrench the powerful Eastern, woke and corrupt interests that dominate the political, social and economic institutions in Canada. Federal authorities are constantly trying to censor us and stop us from publishing the stories that they don’t want you to read. Ottawa may weaponize our taxes and police against us, but we’ve got a powerful ally on our side.You. Free men, and free women. We need you to stand with us and become a member of the Western Standard. Here’s what you will get for your membership:Unlimited access to all articles from the Western Standard, Alberta Report, West Coast Standard, and Saskatchewan Standard, with no paywall. Our daily newsletter delivered to your inbox. .Access to exclusive Member-only WS events.Keep the West’s leading independent media voice strong and free.If you can, please support us with a monthly or annual membership. It takes just a moment to set up, and you will be making a big impact on keeping one the last independent media outlets in Canada free from Ottawa’s corrupting influence.