Bank of Canada likely won't hike interest rates but next move could go either way

Dated: March 5 2019

Views: 40

Bank of Canada likely won't hike interest rates but next move could go either way

FILE PHOTO: Bank of Canada Governor Stephen Poloz listens to a question during a news conference in Ottawa, Ontario, Canada, January 9, 2019. REUTERS/Chris Wattie/File Photo

Economists are pretty much all on the same page in expecting the Bank of Canada to leave its key benchmark interest rate unchanged on Wednesday. But they are divided on whether the next move will be a cut or a hike.

The central bank has kept rates unchanged at 1.75 per cent since October after hiking five times since the middle of 2017.

Global comparison site Finder’s Bank of Canada Overnight Survey asked 11 economists for their predictions and none of them expect a hike. Most of them blame economic uncertainty or a slowing economy.

“Other than an overheating housing market in many major cities, there is still much economic uncertainty,” said Moshe Lander, economics professor at Concordia University, in the report.

“A wait-and-see approach is prudent until the economy is clearly pointed in one direction or another.”

Bank of Canada Governor Stephen Poloz has regularly stressed rate decisions are data dependent. The most recent barometer — fourth-quarter GDP — was less than stellar.

“The Bank [of Canada] is predicting a significant slowdown in economic growth this quarter, allowing it to be patient when it comes to future interest rate increases,” said Alicia MacDonald, principal economist at The Conference Board of Canada, in the report.

Where do we go from here?

Five of the 11 economists polled predict the next move is a rate hike — three of them predict it will happen in October.

Two believe a rate cut is next. Gregory C Mason, associate professor of economics at the University of Manitoba expects it to happen in July. Hubert Marleau, chairman at Palos Capital, forecasts a cut in October.

At 64 per cent, most have a negative outlook for housing affordability — a concern shared by Poloz. Five economists suggest relaxed zoning restrictions and reduced regulations. Others suggest the government should ease the stress test rules, incentivize construction, and maintain or possibly increase the tax on speculators.

Despite record debt levels, only 55 per cent had a negative outlook for household debt. Angus Kidman, Global Editor-in-Chief at Finder, says it’s still a good time to reevaluate your spending habits.

“Given many of the economists noted an environment of local and global economic uncertainty, now is a great time to take a closer look at your finances,” said Kidman, in the report.

“Whether it’s your streaming provider or the interest you’re paying on a loan, compare your options to make sure you’re getting the best deal.”

A bright spot is wage growth with 36 per cent having a positive outlook, 64 per cent neutral, and none were negative.

Blog author image

Steven Axford

Steve is a award winning Realtor in Victoria BC, with his listings selling 53.03% faster than average and for 1.01% MORE money. Growing up in Victoria, BC and has always been active in his community. ....

Latest Blog Posts

Victoria's $100 million Customs House luxury condominium project nears completion

Three years after touring Victoria’s Customs House mixed-use condominium and retail offering during its interior de-construction, Citified is honoured to be the first media

Read More

Three Things to Prioritize When Selling Your Home!

Just because it’s a “Sellers Market” it doesn’t mean you are guaranteed success no matter what. Check out our video below!3 Things to Prioritize When Selling Your?

Read More

Unwavering demand reinforces need to support supply of homes!

June 1, 2021 The Victoria market continued to show its strength through the month of May, with a near record setting pace for sales and ongoing record low inventory levels. A total of 1,049

Read More

Housing mania' sends affordability to 31-year low

The pandemic-driven surge in residential real estate demand has sent Canadian housing affordability spiraling to its worst level in more than three decades, according to a new report from RBC

Read More