The chances of a Bank of Canada rate cut this year have slipped sharply, with ec...
BENGALURU - The chances of a Bank of Canada rate cut this year have slipped sharply, with economists in a Reuters poll divided on whether the bank should ease policy next year despite widespread expectations for growth to slow.
Expectations of fiscal spending from Prime Minister Justin Trudeau’s Liberal government, which won the election this week but lost its majority, has lowered market bets for a rate cut by the end of this year to around 10% from about 90% in September. On whether the BoC would cut rates before end-March, economists were split, with 19 of 35 economists predicting at least one rate cut.
Despite inflation predicted to remain close to the central bank’s target of around 2% until at least 2021, the consensus narrowly pointed to a rate cut in the first quarter of next year and policy on hold after that until the middle of 2021 at least. “Arguably permanent damage is already done to the global outlook with trickle over effects into Canada. If the Fed cuts on top of the BoC’s policy rate and goes beneath, CAD will keep lighting up and impair export competitiveness. Fiscal stimulus may be too little, too late, and transitory,” noted economists at Scotiabank.
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