The Bank of Canada is set to decide whether to cut, hold or increase interest rates on Wednesday\u00a0 \u2014 and a growing number of economists say they are anticipating a cut.<\/p>\n
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\u201cWe think that the Bank of Canada should and will cut interest rates again next week,\u201d said Andrew Grantham, executive director and senior economist at CIBC.<\/p>\n
\u201cRecent data hasn\u2019t been particularly threatening from an inflation point of view, and so we think that the Bank of Canada has room to respond to the signs of a slowing in the economy.\u201d<\/p>\n
The Bank of Canada\u2019s upcoming decision comes after several rounds of economic data released over the summer that suggest the economy and labour market are weakening.<\/p>\n
That includes the third straight drop in gross domestic product in June, and recent consumer price index reports that show inflation appears to be stabilizing\u00a0within the central bank\u2019s one to three per cent target range, which aims to keep inflation increases low and stable.<\/p>\n
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\u201cWe believe they\u2019re (the Bank of Canada is) going to cut rates Wednesday, and we could see a couple of more cuts this year if the data does not pan out the way the bank was expecting,\u201d principal economist Andrew DiCapua at the Canadian Chamber of Commerce said.<\/p>\n
The Labour Market Survey for August also showed that unemployment rose to more than seven per cent, which economists say will likely factor into the Bank of Canada\u2019s assessments. This was as the trade war led many business owners to reduce their workforce or freeze hiring due to higher costs from tariffs.<\/p>\n
\u201cThe Bank of Canada was expecting a (GDP) contraction in Q2 \u2014 that was no surprise to them. I think what is more surprising is that the unemployment rate has continued to increase as we\u2019ve gone into Q3,\u201d Grantham said.<\/p>\n
\u201cA higher unemployment rate, that would typically mean lower inflationary pressures the longer term because people may not be comfortable spending as much money. It might have a disinflationary impact longer term.\u201d<\/p>\n
\n\t\t\t\t<\/p>\n Grantham and other economists who spoke with Global News are predicting the Bank of Canada will cut rates on Sept. 17 by 25 basis points, which would bring its benchmark from 2.75 per cent to 2.5 per cent \u2014 with potentially more to come after.<\/p>\n Story continues below advertisement<\/p>\n<\/p><\/div>\n If there is a cut on Wednesday and a cut in October, that would likely bring interest rates down to what Grantham said economists describe as a \u201cneutral level.\u201d<\/p>\n Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n \u201cWe do need to stimulate the economy, we do need to lower the unemployment rate and to get rid of this, what economists like to call \u2018slack\u2019 within the Canadian economy,\u201d he said.<\/p>\n\n\t\t\t\tWhat kind of cut are economists eyeing?\t\t\t<\/h2>\n<\/p><\/div>\n
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