Most economists expect the Bank of Canada to continue raising interest rates this week
The Bank of Canada (BoC) is expected to raise interest rates again this week as the Canadian (CAN) economy still hasn't slowed enough for the central bank to be comfortable with and any easing in stance could lead to another surprise rebound in inflation, according to most economists.
The interest rate decision will be released on Wednesday, local time, and is expected to increase by another 25 basis points, taking the policy rate to 5.00%. In June, the central bank unexpectedly raised interest rates by 25 basis points, putting them back on an upward path as a range of economic indicators suggested inflation might not fall steadily as expected.
Dawn Dejardin, chief economist at Deloitte, said: "There have been some recent signs that economic activity is slowing, such as the June jobs report showing rising unemployment and decelerating wage growth. I do think we are seeing a change. But is it changing fast enough for Canadian banks? Maybe not enough."
Randall Bartlett, senior director of Canadian economics at Desjardins Securities, said the Labour market remains tight. "We still see a lot of underlying momentum in the Canadian Labour market, and a lot more than you would expect with overnight interest rates near 5 per cent," he wrote in a note. We think it is appropriate for the central bank to remain hawkish, as our model forecasts suggest that growth in the second quarter will be much stronger than the central bank forecasts, and keeping this stance will set the stage for inflation to fall back to target."
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