The Bank of Canada will maintain its benchmark rate when it meets next week, according to one ScotiaBank economist.
“We expect the Bank of Canada to remain on hold on Wednesday with the overnight rate unchanged at 0.5%,” Derek Holt, vice president of Scotia Economics, writes in the bank’s latest economic forecast. “It will be a statement-only affair with no forecast updates or press conference.They will come next in October.”
And Holt argues the Bank of Canada will maintain the status quo for the foreseeable future.
“By the end of this year, the vast majority of forecasters — including us — think the overnight rate will remain unchanged at 0.5%,” Holt writes. “By the end of next year, the vast majority either think the policy rate will remain stuck at this level, or it will be hiked. Our house view is a policy hold throughout this year and next.”
Holt’s prediction aligns with those of several mortgage brokers, who also believe the central bank will maintain its rate. Regardless of the decision, brokers expect it to have little impact on business.
The prediction follows the dreary Canadian jobs data, released by Statistics Canada Friday that showed the unemployment rate increased 0.2 percentage points to 7.0% in August.
Prior to August, the unemployment rate had held steady at 6.8% for six consecutive months..
The question of whether Canada remains in a recession is still unanswered.
Regardless, Holt argues economic policy has been too conservative.
Holt says the Bank of Canada “overreacted” to the economic headwinds facing the country, and that the easing was excessive.