BoC rate cut in January now more likely – survey

Strong macroeconomic indicators and target inflation were main drivers of the latest rate hold

BoC rate cut in January now more likely – survey

With yesterday’s BoC rate hold being widely predicted, more than half of economists polled by Finder are anticipating a rate cut in January.

“Our report suggests we’re in store for a rate cut in December of this year or early 2020. Not only did a quarter of economists on the panel think the Bank should have cut the rate [on October 30], 100% think the next rate move will be down,” Finder Canada acting country manager William Eve said.

“While it’s delayed for now, a rate cut in December or January could be great timing for those who spend a little more than they’d like to over the Holiday period and are looking to pay down their debt as quickly as possible.”

Economists’ consensus was that the hold decision came about due to strong macroeconomic indicators and target inflation.

“The Bank of Canada usually foreshadows an impending move, but it avoided doing so in its September 4 statement and in subsequent communications,” Scotiabank deputy chief economist Brett House explained.

“Since then, high frequency macro data has remained solid, and average core inflation for September remains on-target at 2.07%. Additionally, uncertainty and trade tensions with the US have not increased.”

Meanwhile, around 58% of those surveyed by Finder stated that rates would fall in January.

“We expect the economic data to weaken from here and, given that changes in monetary policy take a long time to have their full effect on the economy, think that it would be prudent for the Bank to enact a couple of insurance cuts,” Capital Economics senior Canada economist Stephen Brown noted.