(Bloomberg) -- The slowdown economists have been warning about has arrived in Canada — and with it, the likely end of the Bank of Canada’s historic campaign ...
-- The slowdown economists have been warning about has arrived in Canada — and with it, the likely end of the Bank of Canada’s historic campaign of rate increases.Jamie Dimon Criticizes Central Banks for Getting Forecasts Wrong
Macklem won’t want to do anything that constrains the bank’s ability to raise borrowing costs again, if necessary. “Watching from the sidelines is warranted,” Charles St. Arnaud, chief economist at Alberta Central, said by email. His research suggests economic downturns in Canada tend to start five to seven quarters after interest rates reach a level that restrict growth, which Arnaud says happened in the fourth quarter of 2022.His estimates line up with consensus forecasts for very slow growth. Gross domestic product is expected to expand by 0.
Canada’s households are more indebted, on average, than their US counterparts and their shorter-duration mortgages roll over faster. That makes the Canadian economy more sensitive to higher rates and it’s one reason the Bank of Canada first declared a pause in January, well before the US Federal Reserve.
“If they ultimately wind up allowing inflation expectations to come unanchored because they under-tightened, I think that makes their job quite a bit more difficult in the future,” Andrew Kelvin, chief Canada strategist at Toronto-Dominion Bank’s securities unit, said by phone. “It ultimately produces worse economic outcomes.
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