![]() "Maybe they didn't have to explicitly say they were on conditional pause and they could have left the door open a bit more. It's "really easy" to criticize the central bank's moves in hindsight, Reitzes says.īoth economists agree that the Bank's communications around the rate pause could have been refined. The accumulation of evidence across a range of economic indicators suggests that excess demand in the Canadian economy is more persistent than we thought, and this increases the risk that the decline in inflation could stall," Paul Beaudry, deputy governor of the Bank of Canada, said in a speech in B.C. "The data since April have tipped the balance. The labour market had also proved to be resilient, however, that eight-month streak of employment gains was halted in May as employers shed jobs, Statistics Canada reported on Friday. Recent data releases showed the Canadian economy grew more than expected in the first quarter and inflation ticked higher. What took most by surprise, he adds, is how quickly the economy rebounded. When the Bank first paused its rate-hiking cycle in March, economic data showed it was an appropriate move at the time, Brown says, as inflation was easing and home prices were falling. "If the growth backdrop doesn't cool, it's hard for them to see inflation slowing." Hindsight is 20/20 "We got the quarterly GDP numbers a week ago, and the Bank of Canada does put a lot of weight on those numbers," Reitzes said. ![]() The Bank of Canada is back in hiking mode after lifting its benchmark rate by a quarter point on Wednesday to 4.75 per cent, with financial markets betting on another increase at the July meeting. ![]() And then you're just going to put increasing amounts of stress on them and it does take a good amount of time for the full impact of these rate hikes to pass through," Reitzes said. "We're getting to a point where rates are already quite challenging for a number of households. He sees the Bank's benchmark rate topping out at five per cent as more data roll in through the summer about how businesses and consumers are handling higher rates.īMO Capital Markets Canadian rates and macro strategist Ben Reitzes also expects the central bank will not increase rates beyond the five per cent threshold. So I think most people now, certainly our forecast, is that the bank will hike again in July," Stephen Brown, deputy chief North America economist at Capital Economics, said in a phone interview. It's hard to see how a single 25 basis point hike would change that view. " did tell us that it basically lost confidence that the current level of interest rates was enough to get inflation back to 2%. More pain is on the way for indebted Canadian households, but they might be able to take some cold comfort that interest rates could soon peak, according to Bay Street economists. Technology fell 1.7%, while consumer staples fell 1.2%, weighed down by a 2.2% decline in shares of retailer Loblaw Companies Ltd after the company reported quarterly earnings.The Bank of Canada is battling a stronger-than-expected economy to bring inflation back down to its two per cent target. Rogers Communications Inc shares also climbed, ending up 2.8%, after the company raised its annual forecasts for adjusted core earnings and free cash flow. Healthcare jumped 4%, helped by a gain of 15.9% for shares of Tilray Brands Inc after the cannabis producer reported quarterly revenue that beat analyst estimates. The Toronto market's heavily-weighted financials sector rose 0.3% and industrials were up 0.6%. It discussed delaying a hike at the last meeting before deciding on a raise to ensure progress in dampening inflation did not stall, according to minutes published on Wednesday. The Bank of Canada has also been raising rates. "So not a lot of volatility coming out of this." "I would say this Fed meeting and press conference is probably going as on-script as we've seen in a long time," said Greg Taylor, a portfolio manager at Purpose Investments. The Fed raised interest rates by a quarter of a percentage point, setting the benchmark rate in the 5.25%-5.50% range, and the accompanying policy statement left the door open to another increase. The Toronto Stock Exchange's S&P/TSX composite index ended up 10.11 points, or 0.05%, to 20,561.64, within reach of its highest closing level in two and a half months posted on Monday.
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