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

Dated: March 5 2019

Views: 23

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 Axford grew up in Victoria, BC and has always been active in his community. Steve is a Victoria Cougars Hockey Team alumni as well as a Victoria Shamrocks (intermediate) alumni. During his time....

Latest Blog Posts

Victoria Real Estate Market continues to outperform in unpredictable times

October 1, 2020  A total of 989 properties sold in the Victoria Real Estate Board region this September, 60.6 per cent more than the 616 properties sold in September 2019 and 1 per cent more

Read More

Choosing Flooring: 6 Things You Need to Know

When it comes to choosing new flooring for your home or apartment, the options can be overwhelming. Almost every type of flooring has some sort of advantage over other kinds, and taking in all the

Read More

Consumer interest in homeownership in Victoria unwavering over course of pandemic

A total of 989 properties sold in the Victoria Real Estate Board region this September, 60.6 per cent more than the 616 properties sold in September 2019 and 1 per cent more than the previous month

Read More

Understanding Canada’s Record Home Sales Last Month, And Why It’s Likely To Continue

Canada’s late Spring real estate market continues, but some of the pent-up demand has caught up. Canadian Real Estate Association (CREA) data show a new all-time record for August

Read More