This signal of growing risk of recession may keep Stephen Poloz on hold for his final 14 months as head of the Bank of Canada
Canada has joined the U.S. in the inverted yield curve club, signaling a growing risk of recession that may keep Stephen Poloz on hold for his final 14 months as head of Canada’s central bank.
“A rate cut would require signs that the economy is declining,” said Craig Alexander, chief economist at Deloitte Canada, in a television interview with BNN Bloomberg Friday. Still “the inverted yield curve is troubling. Inverted curves have often been accompanied by recession.” Investors are buying top-rated government securities in Canada as retail sales unexpectedly declined in January, reinforcing concerns that consumers may no longer be able to drive the economy with household debt at record levels and borrowers facing higher costs following five rate hikes by the Bank of Canada. Economists forecast growth of 1.5 per cent this year, down from 1.8 per cent in 2018, according to Bloomberg surveys.
The yield on the government of Canada 10-year inflation-indexed bond has turned negative, Gibbs points out in his note.
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