A panel of financial experts, put together by Finder.com, has weighed in with its thoughts about the next Bank of Canada overnight rate announcement, with the vast majority forecasting a rate hold.
The Bank makes the rate announcement on July 10, with 93 percent of the economists saying it will hold, but when asked what they think the Bank should do, the percentage of hold predictors falls to 86 percent, while 14 percent say the Bank should cut the rate.
If the Bank cuts the rate, it will have an immediate effect on variable-rate mortgages and could influence fixed rates further down the road.
Brian DePratto, senior economist at TD Bank, thinks the rate should hold, because the Canadian economy has been performing in line with, if not ahead of, Bank of Canada expectations.
“Key housing markets are showing signs of recovery and economic growth appears set to speed up notably in the second quarter,” says DePratto. “The external backdrop remains highly uncertain, which, balanced against domestic strength, suggests the current interest rate setting is about right.”
Senior Canada economist at Capital Economics, Stephen Brown, who also forecasts a rate hold, believes the Bank should cut the rate.
“Core inflation is a lagging indicator so the recent rise doesn’t tell us about current conditions. Much of the rebound in GDP growth in Q2 reflects the reversal of temporary factors that weighed on growth in Q1,” says Brown. “The business surveys paint a gloomy picture and we think the Bank would do well to follow the U.S. Fed’s playbook by enacting some insurance cuts.”
The majority of panelists — 62 percent — think the next interest rate movement, regardless of when it happens, will be a rate decrease. The balance of panelists believe the next move will be an increase.
One panelist who says a cut is in the cards is Moshe Lander, economics professor at Concordia University.
“The next move is likely a cut in the overnight rate. It is best to hold onto that option until there are clear signs of a recession,” says Lander. “The Fed in the U.S. has indicated that they may begin cutting their key target rate later this year. The Bank of Canada should watch their decision closely.”
The panel was evenly divided on the extent to which a U.S. Federal Reserve rate fall would impact the Bank’s decision. Half think it will impact the decision to a moderate or large extent, while the other half of the panel think it will only have a marginal or no impact.
For more information, go to www.finder.com/ca/interest-rate-survey
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