~BW Uzelman

The Bank of Canada held interest rates steady at 5% on September 6. Economists are cautious in their predictions for future rates, but are broadly optimistic.

Rising mortgage rates are impacting increasing numbers of Canadians. But Benjamon Tal, deputy chief economist of CIBC informs that a large number of mortgage and other household debt holders will not be impacted in 2023. His report reads, 香蕉视频直播淥ut of the total household debt of $2.7 trillion, close to $650 billion (24 per cent) face actual increase in interest payment this year.香蕉视频直播� These debt holders and others, no doubt, want an answer to two questions: When is the Bank done hiking interest rates? When will they start cutting rates? Back to that in a bit.

Economist Jim Stanford argues that the Bank has only one job 香蕉视频直播� to control inflation. The Director of the Centre for Future Work, labels it, 香蕉视频直播渢he Bank of Canada香蕉视频直播檚 one-dimensional mission香蕉视频直播�. That is a limited view of its role. The Monetary Policy Framework, an agreement between the Bank and the government, does stress, 香蕉视频直播渢he primary objective of monetary policy is to maintain low, stable inflation over time香蕉视频直播�, but also notes, 香蕉视频直播淢onetary policy should continue to support maximum sustainable employment香蕉视频直播�.香蕉视频直播� Stanford香蕉视频直播檚 narrow view of the Bank香蕉视频直播檚 role appears to stoke his fear that the Bank may well continue to hike rates.

The Bank香蕉视频直播檚 economic analysis is much broader than simply examining the headline rate of inflation and its favoured core measures of inflation. It also conducts analyses of the labour market, the strength of the economy (GDP) and much more. Its September 6 press release says, 香蕉视频直播淚n particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the 2% inflation target.香蕉视频直播� The Bank examines and interprets trends across the economy before determining appropriate monetary policy.

Unsurprisingly, the Bank leaves considerable doubt as to whether it will raise rates further. The press release notes that the economy has 香蕉视频直播渟lowed sharply香蕉视频直播� in the second quarter, with output contracting by 0.2%, which is necessary to relieve price pressure. The release details weaker consumption growth, reduced housing activity and a lessening of the tightness in the labour market, along with continuing wage growth of 4%-5%. The Bank concludes that excess demand is diminishing. This is largely positive, sustaining the BoC香蕉视频直播檚 September decision to hold overnight rate at 5%.

Then comes the bad news, 香蕉视频直播淩ecent CPI data indicate that inflationary pressures remain broad-based.香蕉视频直播� Inflation increased to 3.3% in July, and with recent gas price increases, the Bank expects the rate to remain elevated in the near term before reducing course. Causing further concern, the Bank香蕉视频直播檚 core measures of inflation remain at 3.5%. Of course, the usual statement of determination follows, 香蕉视频直播淭he Bank remains resolute in its commitment to restoring price stability for Canadians.香蕉视频直播� All in all, it is a mixed message: Excess demand is moderating, but inflationary pressures remain.

The next day, however, the Governor of the BoC, Tiff Macklem, managed to sound more optimistic. He allowed, 香蕉视频直播淢onetary policy is working, and inflation is coming down. But we still have some way to go to restore price stability. With past interest rate increases still working their way through the economy, monetary policy may be sufficiently restrictive to restore price stability.香蕉视频直播� Macklem added that if they have to, they will raise rates again, but they don香蕉视频直播檛 want the rate to be higher than necessary.

Many economists think the Bank won香蕉视频直播檛 have to raise rates again because excess demand has been wrung out of the economy. Stephen Brown of Capital Economics noted, 香蕉视频直播淲ith demand quickly shifting from excessive to deficient, and given our expectation that two CPI releases before the Bank香蕉视频直播檚 next meeting will show an easing of core inflation pressures, there will be little need for the bank to hike any further.香蕉视频直播�

Charles St-Arnault of Alberta Central was not so certain. He said further rate increases this year are unlikely, but cannot be ruled out. Douglas Porter of BMO Financials was more confident, 香蕉视频直播渦nless growth rebounds in Q3 香蕉视频直播� which we doubt 香蕉视频直播� the BoC is likely done with rate hikes.香蕉视频直播�

Brown, went further, 香蕉视频直播淲ith recession risks rising and labour market conditions loosening, we continue to think that the bank香蕉视频直播檚 next move will be a rate cut, in early 2024.香蕉视频直播� Brown was amongst the most optimistic of the experts, but cautious optimists predominate.

The BoC香蕉视频直播檚 next move may indeed be a cut 香蕉视频直播� not necessarily in the first quarter of next year 香蕉视频直播� but plausibly within the first two or three quarters. That said, unequivocal forecasts are a risky undertaking. Economists won香蕉视频直播檛 go there, at least not now.

bruce

Bruce W Uzelman

I attended the University of Saskatchewan in Saskatoon.I obtained a Bachelor of Arts, Advanced with majors in Economics and Political Science in 1982.

I have maintained a healthy interest in politics throughout my adult years, and wish to put that and my research skills to work as a political columnist.

Contact: urbangeneral@shaw.ca

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