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Global News
3 days ago
- Business
- Global News
Will the Bank of Canada cut interest rates? What economists expect
Many Canadians are eagerly watching the Bank of Canada's interest rate announcement this week to see if it could mean a bit more breathing room for their finances. But many experts believe the current rates for those who make regular payments on loans like a mortgage won't be changing any time soon. This is partly to do with how U.S. President Donald Trump's tariffs are impacting Canada's economic landscape. Canada's central bank could potentially change interest rates on Wednesday. Although most experts believe that amount won't rise in the near future, they say it is more likely rates will stay the same rather than come down. 'The Bank of Canada has little confidence in the outlook,' Bank of Nova Scotia vice-president and head of capital markets Derek Holt says. Story continues below advertisement 'GDP is tracking a little firmer than anticipated and (the Bank of Canada) is in no rush to react.' 1:55 Tariff fears boost Canada's Q1 exports but hurt consumer spending What is the Bank of Canada and how does it affect the economy? Unlike regular banks — like those on Bay Street, for instance — the Bank of Canada acts in the interest of the economy as a whole rather than for its own profit, and is independent of the government and its policies. Story continues below advertisement Its mandate is to maintain economic stability, and it does so by regulating money supply and interest rates — the amount regular banks and other lenders can charge customers to borrow money. Several times a year, the Bank of Canada updates interest rates when it sets monetary policy. Regular banks set their own interest rate, known as the 'prime' rate, off of the benchmark or overnight rate, the rate floor that is set by the Bank of Canada. The central bank's benchmark rate is currently set at 2.75 per cent, and could be updated on Wednesday. 4:11 First Ministers' meeting set to discuss interprovincial trade and U.S. relations How does the Bank of Canada determine interest rates? The central bank uses a combination of economic reports and surveys on business and consumer sentiment to determine monetary policy. Story continues below advertisement One of the key metrics is inflation, the main example being the consumer price index. Get weekly money news Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday. Sign up for weekly money newsletter Sign Up By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy This is a measure of the increasing prices for consumer goods and services. CPI in April showed that prices overall didn't rise as much as most economists predicted, but that was overshadowed by how much gas and energy prices fell from the removal of the consumer carbon price. The underlying inflation gauge known as 'core' inflation actually showed an increase in April. 'We are a bit hesitant on (rate cuts) after the April CPI report,' says senior economist Jennifer Lee at the Bank of Montreal. 'The Bank of Canada is very focused on inflation — they have to make sure that they get inflation under control.' The job market is also monitored closely, and has also been showing signs of weakness as businesses brace for rising costs from tariffs, and in some cases this has meant rising unemployment and job losses. TD Bank has warned that the economy could see thousands of more jobs lost this year in addition the heightened recession risk, citing the trade war and tariffs. On Friday, Statistics Canada will release the jobs report for May. Story continues below advertisement 'The next jobs report two days after the Bank of Canada's decision is likely to post another loss,' Holt says. The Bank of Canada also closely monitors the country's economic growth, including gross domestic product. The GDP report for March and the first quarter of the year came in better than most economists expected, but they noted that a lot of the increased production output was businesses potentially stockpiling shelves and warehouses in anticipation of the financial impacts of the trade war. 'We are still expecting Canada to be hit negatively by the trade war and all of the uncertainty,' Lee says. 'We're still looking for a technical recession, which is two consecutive quarters of negative GDP growth.' 0:55 Joly lays out Canada's plan forward at Aluminium Summit after Trump says tariffs will double to 50% What could a rate cut mean for Canadians and the economy? The Bank of Canada took a cautious approach at the last announcement, opting to leave rates as they are. Story continues below advertisement For many Canadians, changes to interest rates could mean the difference between paying off balances in full and struggling to make payments. If someone has a variable-rate mortgage, for instance, and the Bank of Canada chooses to cut interest rates, then those mortgage holders will see their monthly costs come down. Another example is if someone is applying for a mortgage or even a car loan, the rate they pay on that loan now may decrease the day after the central bank announces a rate cut. 'In Canada, we're sensitive to interest rates. But interestingly, I actually think lower rates are not the issue at all here,' says mortgage expert and broker Elan Weintraub at Mortgage Outlet. 'The issue is, (for borrowers,) 'Am I going to get laid off?' So I actually don't think interest rates are playing as big of a role.' A cut to interest rates by the central bank could, in theory, make it more affordable for companies to hire new workers and boost production. 'The (Bank of Canada) should really be resuming interest rate cuts to buffer the Canadian economy,' says principal economist Andrew DiCapua at the Canadian Chamber of Commerce. 'I don't see a lot of upside inflation risks just given how much the Canadian economy could head into a recession in the coming months.' Story continues below advertisement 4:27 Ontario, Saskatchewan sign free trade agreement in effort to boost economy amid Canada-U.S. tensions How likely is a rate cut on Wednesday? Many economists have been predicting a rate cut for Wednesday, but the odds have come down slightly given some of the recent economic data and trade war developments, including Trump's threat to increase steel and aluminium tariffs by 50 per cent. 'We are no longer looking for the Bank of Canada to cut rates this week,' Lee says. Story continues below advertisement 'This new added uncertainty of a doubling of tariffs on steel and aluminum was a little bit of a wrench thrown into the mix.' Holt also predicted no rate cut this time, saying, 'Markets now only have a one-in-five chance of a cut priced after backing away from what had been pricing for more than a quarter of a percentage point cut around early April.' Although most economists aren't expecting a rate cut this time, many still feel that the central bank should consider cutting interest rates sooner than later. 'It's kind of a 50-50 call,' DiCapua says. 'They're waiting for this shoe to drop, so to speak — one clear data point that's showing the sort of widespread economic shock has begun, but there is more cutting that will need to be done this year.'
Yahoo
3 days ago
- Business
- Yahoo
Canadian dollar pushes through 73 cents U.S. on more tariff turmoil and possible Bank of Canada hold
The Canadian dollar pushed past 73 cents U.S. on Monday on the rising chances of the Bank of Canada holding interest rates this week as rising tariff risks weaken the greenback. The loonie broke through 73 cents U.S. for the first time since October 2024, continuing an ongoing reversal of fortune against its United States counterpart. The Canadian dollar is now up six per cent from an almost 10-year closing low of 68.8 cents U.S. on Jan. 31. 'Factors continue to shift in favour of a slightly stronger (Canadian dollar),' Shaun Osborne, chief currency strategist, and strategist Eric Theoret at the Bank of Nova Scotia, said in a note, adding that 'a cautious hold from the (Bank of Canada) may help the (Canadian dollar) progress and solidify topside (U.S. dollar) resistance.' The Bank of Canada will announce its next interest rate decision on Wednesday. Markets are currently betting that there is a 30 per cent chance of a cut at the meeting, with Royal Bank of Canada and Bank of Montreal abandoning their calls for a 25-basis-point rate cut following the release of stronger-than-expected gross domestic product numbers for the first quarter. Now, BMO is calling for the Bank of Canada to cut rates at its policy meeting at the end of July. A rate hold should provide support to the Canadian dollar, while a cut would make the loonie less attractive to investors. Meanwhile, the U.S. dollar started off June on the back foot, giving the loonie another boost. 'The dollar is back on the defensive as June begins, retreating amid a worsening in trade tensions between the United States and its global counterparts,' Carl Schamotta, chief market strategist at Corpay Currency Research, said in a note. On Friday, U.S. President Donald Trump announced he would increase tariffs on steel and aluminum to 50 per cent from 25 per cent currently. That move plus resurgent trade tensions between the U.S. and China have pushed the greenback down against a basket of currencies that include the Canadian dollar. On Monday, the U.S. dollar index hit its lowest point since April. Opinion: It's not just trade. Trump may want a dollar deal, too Markets expect a Bank of Canada pause, but these economists have other ideas The index had been on a tear after polls started to track Trump's rising chances of winning the presidency and peaked in mid-January. Since then, the index is down just a bit more than 10 per cent as the president's tariff threats hurt the economic outlook. Although the Canadian dollar has been gaining ground on the U.S. dollar, it's still down against all G10 currencies aside from the greenback since mid-January due to Canada's exposure to the American economy. For example, the loonie is down 12.6 per cent against the Swedish krona, 6.9 per cent against the Swiss franc, 6.3 per cent against the euro and 5.9 per cent against the Japanese yen. • Email: gmvsuhanic@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
29-05-2025
- Business
- Yahoo
BMO Capital Maintains Hold Rating on Scotiabank (BNS) As Provision for Credit Losses Increase
On May 28, BMO Capital analyst Sohrab Movahedi maintained a Hold rating on The Bank of Nova Scotia (NYSE:BNS) and kept the price target at C$79. The update comes after the company released its fiscal second-quarter results for 2025. The bank released its second-quarter results on May 27, missing analyst estimates as credit loss provision continued to rise. The Bank of Nova Scotia (NYSE:BNS) delivered revenue of $6.57 billion, reflecting a 7.37% year-over-year increase, exceeding analyst consensus by $83.95 million. However, the EPS of $1.10 missed the consensus by $0.03. A businessman's hand pointing to a graph on a projector screen illustrating economic trends. The provision for credit losses increased from $1.007 billion a year ago to $1.398 billion. Canadians are not spending as much as expected because of tariffs imposed by the United States, said the executives of the bank. Therefore, the bank kept a higher amount of money on the side to cover these losses. The Bank of Nova Scotia (NYSE:BNS) also known as Scotiabank is a Canadian chartered bank that provides banking, global wealth management, global banking and markets, and other related services. While we acknowledge the potential of BNS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than BNS and that has 100x upside potential, check out our report about the . READ NEXT: and . Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
28-05-2025
- Business
- Yahoo
Bank of Nova Scotia Q2 Earnings Fall on Higher Provisions & Expenses
The Bank of Nova Scotia's BNS second-quarter fiscal 2025 (ended April 30) adjusted net income was C$2.07 billion ($1.5 billion), which declined 1.6% year over year.A rise in expenses and provisions for credit losses hurt the results. Lower loan balances also acted as a dampener. Nevertheless, results benefited from higher revenues and solid capital considering non-recurring items, net income was C$2.03 billion ($1.48 billion), down 2.9% from the prior-year quarter. Total revenues were C$9.08 billion ($6.59 billion), up 8.8% year over interest income was C$5.27 billion ($3.83 billion), which increased 12.3%. Likewise, non-interest income grew 4.3% to C$3.81 billion ($2.77 billion).Non-interest expenses were C$5.11 billion ($3.71 billion), up 8.5% on a year-over-year basis. Provision for credit losses jumped 38.8% to C$1.4 billion ($1.02 billion). The rise reflects a deteriorating economic outlook. As of April 30, 2025, Bank of Nova Scotia's total assets were C$1.42 trillion ($1.03 trillion), down 1.6% on a sequential basis. Deposits were C$945.8 billion ($686.9 billion), which declined 2.1% from the previous loans were C$756.4 billion ($549.4 billion), down 1.3%. As of April 30, 2025, the Common Equity Tier 1 ratio was 13.2, which was stable with the prior-year quarter. Further, the total capital ratio was 17.1, which was stable with the prior-year return on equity was 10.4%, down from 11.3% in the year-earlier quarter. A diversified product mix and strong capital position are expected to continue supporting Bank of Nova Scotia. However, concerns related to macroeconomic conditions and rising expenses make us apprehensive. Bank of Nova Scotia (The) price-consensus-eps-surprise-chart | Bank of Nova Scotia (The) Quote BNS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Toronto-Dominion Bank TD reported second-quarter fiscal 2025 (ended April 30) adjusted net income of C$3.6 billion ($2.63 billion), which declined 4.3% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)TD's results were affected by higher provisions for credit losses and expenses. Also, lower loan balances were another negative. Nonetheless, growth in NII and non-interest income was Bank of Canada's RY second-quarter fiscal 2025 (ended April 30) numbers are scheduled to be announced on May the past seven days, the Zacks Consensus Estimate for RY's quarterly earnings has been revised marginally downward to $2.25 per share. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Toronto Dominion Bank (The) (TD) : Free Stock Analysis Report Royal Bank Of Canada (RY) : Free Stock Analysis Report Bank of Nova Scotia (The) (BNS) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Reuters
28-05-2025
- Business
- Reuters
Canada's Scotiabank misses profit estimates as tariffs push up loan loss reserves
May 27 (Reuters) - Bank of Nova Scotia ( opens new tab on Tuesday missed quarterly earnings estimates, burdened by a larger than expected sum of money put aside to shield against bad loans in a challenging environment riddled with trade uncertainties. Scotiabank's Canadian banking unit, its biggest income generator, recorded a 31% drop in net income largely due to an increase in loan loss reserves as U.S. tariffs weigh on Canadian retail and commercial portfolios. U.S. President Donald Trump's trade policies have created tremendous uncertainty for Canada's economy. But some analysts are optimistic that newly elected Prime Minister Mark Carney will implement pro-business policies that will drive private sector investment. CEO Scott Thomson noted the new political stability in Canada but said weaker consumer and business confidence would hurt near-term loan growth and capital markets activity. "We have seen softness. We have seen uncertainty. But as we look to the back half of this year and into 2026, I do think there's a moment here where you're going to see an inflection point, a little bit more loan growth," Thomson told analysts. Consumers were being cautious with their spending, holding back on adding new debt or making new investments and were instead building their cash savings, Scotiabank executives said. Loan loss provisions, the money lenders set aside to cover for souring loans, rose to C$1.40 billion ($1.02 billion), from C$1 billion a year ago. Analysts had projected C$1.22 billion. Bay Street viewed the expansion of Scotiabank's rainy day reserve as a positive. Analysts said, excluding the reserve build-up, the lender's results were strong, supported by its first dividend increase in two years. "While there are still some headwinds to underlying growth, we believe that this is a result of the operating environment and not necessarily Scotia-specific," Jefferies analyst John Aiken said. Shares of Scotiabank, Canada's fourth-largest by market capitalization, rose 1% in Toronto. Since taking charge in 2023, Thomson has led the company in a new direction focusing on the $1.5 trillion North American trade corridor by selling troubled assets in Colombia, Panama and Costa Rica and investing in regional U.S. lender KeyCorp (KEY.N), opens new tab. Scotiabank's international business reported a 6% increase in adjusted earnings, and its global banking and markets segment recorded a 10% rise. The bank reported adjusted earnings of C$1.52 per share, compared with analysts' average estimate of C$1.56, according to LSEG data. Scotiabank is the second big Canadian lender to report after TD Bank ( opens new tab, which announced a 2% workforce reduction. ($1 = 1.3759 Canadian dollars)
