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Reuters
21 hours ago
- Business
- Reuters
Bank of Canada to hold rates at 2.75% but cut at least twice more this year
BENGALURU, June 2 (Reuters) - The Bank of Canada will hold interest rates at 2.75% on Wednesday as policymakers await further news on an economy that grew faster than expected last quarter, with at least two more cuts likely this year, according to a majority of economists in a Reuters poll. That strong consensus around the upcoming decision came after data on Friday showed the economy grew quicker than predicted last quarter, at 2.2%. The surprising growth was primarily driven by exports as U.S. companies rushed to stockpile Canadian goods before U.S. President Donald Trump's tariffs kick in. Lower household spending and weak domestic demand, however, suggest a downturn is coming. Also, Trump's recent announcement he would double tariffs on imported steel and aluminum to 50% could further worsen the outlook. Still, solid economic growth in Q1 and core inflation flirting with the upper end of the BoC's 1-3% target range will provide ample reason for the central bank to hold rates this week for a second straight meeting. Over 75% of economists, 20 of 26, polled by Reuters said so following the gross domestic product data release. That is in line with interest rate futures pricing. "There isn't urgency from the growth numbers, and there is caution from the core inflation numbers," said Douglas Porter, chief economist at BMO Capital Markets, who expects the BoC to hold. "The overall GDP numbers have been surprisingly resilient. While the economy is certainly not as strong as the headline suggests, the reality is (that) it has managed to grind out some modest growth." Prior to the release, economists were unsure about the decision. Among top Canadian banks, BMO, CIBC and TD shifted their call to a pause from a cut while Scotiabank stood pat on their earlier view of no change. The BoC has already cut the rate by a cumulative 225 basis points since June 2024. Although there was no clear consensus on where rates would be by end-2025, nearly 75% of economists - 17 of 23 - said the BoC would cut rates at least twice more this year, including eight forecasting another two reductions, seven saying a further three cuts and two a further four. "While we would argue a cut would be the right step, odds are the BoC won't deliver one just yet, having signaled that it's less willing to be forward-looking amidst considerable uncertainty over the outlook," said Avery Shenfeld, chief economist at CIBC. "So we look for a pause (on Wednesday), but one accompanied by a message that leaves the door open for rate relief ahead." Last month, BoC Governor Tiff Macklem explicitly warned of a possible growth slowdown in coming quarters. But the BoC will refresh its economic outlook in July, which could be another reason to wait this week. The economy grew 0.1% in April, better than feared, but that is unlikely to be sustained. It will contract 1.0% and 0.5% this quarter and next, respectively, poll medians showed. If realised, that would meet the technical definition of a recession. "Whatever happens next, the BoC cannot assume the status quo will hold ... We believe Canadian growth is likely to slow sharply through the middle part of the year, justifying further rate cuts," said Andrew Kelvin, head of Canadian and global rates strategy at TD Securities. (Other stories from the Reuters global economic poll)
Hamilton Spectator
3 days ago
- Business
- Hamilton Spectator
Economists expect Bank of Canada will pause interest rate cuts following surprise GDP growth
The Canadian economy grew more than expected in the first three months of 2025 as businesses tried to get ahead of U.S. President Donald Trump's tariffs, prompting economists to reevaluate their predictions for the upcoming Bank of Canada interest rate decision. Real gross domestic product (GDP) grew at an annualized pace of 2.2 per cent, Statistics Canada reported Friday morning. That's higher than the agency's early estimate of 1.5 per cent and the economist consensus of 1.7 per cent. 'The key point here is that the GDP figures are sending no obvious distress signals so far in 2025,' BMO economist Douglas Porter wrote in a note to clients. He pointed out that Canada's economy was among the top performers in the G7 as GDP dropped in both the U.S. and Japan last quarter. 'With this sturdy set of results, we are officially abandoning our call of a (Bank of Canada) rate cut next week,' he said RBC economists also said they believe the bank will be holding rates steady. Canada exported more cars, industrial machinery, equipment and parts in the first quarter, StatCan said. At the same time, imports for those kinds of goods rose. 'The threat of tariffs can be expected to influence trading patterns and incite importers to increase shipments prior to these tariffs being implemented to avoid additional costs,' StatCan wrote. But while Friday's headline might indicate the Canadian economy is faring well, 'digging beneath the surface suggests otherwise,' said TD economist Andrew Hencic in a note. Household spending slowed in the first quarter with Canadian consumers spending less on passenger vehicles. Residential investment also decreased as resale activity slumped. Other economists than Porter seem less sure on what Friday's news will mean for the Bank of Canada's interest rate call next Wednesday. The policy rate currently sits at 2.75 per cent. Experts are concerned about surging unemployment, particularly among young people . But the bank's preferred 'core' inflation measures, which exclude the impacts of the consumer carbon tax removal, heated up last month . 'The upshot is that there is still a strong case for the Bank to cut next week although, amid the extreme tariff uncertainty following events this week, we clearly can't rule out another pause as the Bank awaits for more information,' wrote Capital Economics economist Stephen Brown in a note to clients. 'Indeed, market participants are more convinced than us, with interest rate swaps pricing in an 80 per cent chance of a pause,' as of Friday morning, he said. Last Wednesday, an American federal court blocked Trump from imposing sweeping tariffs under an emergency-powers law. But, for now, the tariffs will remain in place while he appeals the decision by the U.S. Court of International Trade. With files from The Associated Press.
Globe and Mail
09-05-2025
- Business
- Globe and Mail
U.S. tariffs begin to squeeze Canada's labour market, jobless rate rises to 6.9%
Canada lost more than 30,000 manufacturing jobs last month while Windsor saw a jump in its unemployment rate as U.S. tariffs take aim at the automotive sector and feed into economic uncertainty. Statistics Canada's Labour Force Survey on Friday said employment increased by 7,400 nationally, though that figure was padded by an increase in election-related hiring. The overall unemployment rate rose to 6.9 per cent, up from 6.7 per cent in April. The April jobs figures illustrate how tariffs are beginning to squeeze the Canadian economy, affecting regions and industries most exposed to trade with the United States. Ontario saw the largest decline in employment, falling by 35,000, with most of those jobs in the manufacturing sector. In Windsor, a major hub for the automotive industry, the unemployment rate jumped by 1.4 percentage points, reaching 10.7 per cent. In trade-dependent Windsor, Trump's tariff threats rattle residents and businesses 'It doesn't take an archeological dig to realize this is a weak report,' BMO chief economist Douglas Porter wrote in a client note. 'This is the first major data reading for April, and it shows that tariffs are already taking a material bite out of the economy.' Mr. Porter said the report increases the odds of a quarter percentage point rate cut from the Bank of Canada in June. Statistics Canada found that employees working in trade-exposed industries dependent on U.S. demand were more likely to anticipate fewer employees at their workplace over the next six months.
Yahoo
26-02-2025
- Business
- Yahoo
TSX rises as tech shares advance ahead of Nvidia results
By Ragini Mathur (Reuters) -Canada's main stock index rose on Wednesday, lifted by information technology stocks ahead of U.S. chip giant Nvidia's results. The S&P/TSX composite index was up 0.8% at 25,409.45, on pace to claw back some of its recent declines. Information technology shares led the gains, up 1.9%, as markets awaited quarterly results after hours from AI bellwether Nvidia. Investors are scrutinizing AI spending, particularly after January's market jitters triggered by China's DeepSeek announcing low-cost competition. Meanwhile, National Bank of Canada on Wednesday reported a higher first-quarter profit helped by robust performance in its wealth management unit. The lender's shares, however, dipped 3.4%. Bigger peers Bank of Montreal and Bank of Nova Scotia beat profit estimates on Tuesday, also helped by strong income in their wealth management businesses. "The bank earnings so far have been solid and that's certainly lent a pretty big hand to the Canadian market," said Douglas Porter, chief economist at BMO Capital Markets. Heavily-weighted financials added 0.41% to the benchmark index. Materials climbed 0.8% as shares of copper miners in North America rose after U.S. President Donald Trump moved closer to imposing tariffs on imports of the red metal. Canadian miners Hudbay Minerals rose 4.2%, Teck Resources rose 1.3% and First Quantum rose 2.2%. Limiting overall gains, communication shares fell 0.6% after BCE fell over 1%. Energy lost 0.24% as oil prices stayed at two-month lows after a potential peace deal between Russia and Ukraine continued to weigh on prices. [O/R] Sign in to access your portfolio
Yahoo
07-02-2025
- Business
- Yahoo
Canada's economy posts jobs gain and unemployment drop, but trade uncertainty 'casts cloud' for BoC
Canada's labour market added a net 76,000 jobs in January, surpassing analyst expectations, while the unemployment rate fell 0.1 percentage points to 6.6 per cent, according to Statistics Canada data released on Friday. The drop in the unemployment rate was unexpected, marking the second consecutive monthly decline, and the jobs gain was more than triple what economists had forecast. Economists had expected a jobs gain of 25,000 and for the unemployment rate to climb back up to 6.8 per cent, according to Reuters. "If we weren't all absorbed with the possibility of a trade war, we would be talking about the comeback in the Canadian domestic economy in recent months," BMO chief economist Douglas Porter wrote in a research note on Friday. "The turnaround in jobs growth, even amid cooler population trends, reinforces the message from firmer auto and home sales that the economy was turning a corner, thanks to the heavy-duty drop in interest rates in the past eight months. Alas, we still need to contend with the lingering uncertainty on the trade front, which casts a cloud over these sunny jobs figures." The Bank of Canada cut its benchmark rate by 25 basis points last month as Governor Tiff Macklem warned that a trade war between Canada and the United States "would badly hurt economic activity in Canada." Porter says while the report does not reinforce a need for near-term rate relief from the Bank of Canada, "the clear and present trade risks will keep rate-cut hopes alive." Still, market bets reduced the odds of a 25 basis point rate cut at the Bank's next decision in March, to 58 per cent from 72 per cent before the jobs report was released, according to Reuters. RBC assistant chief economist Nathan Janzen wrote in a research note that it's "probably too early to give labour markets the all clear", particularly given the unemployment rate is still up almost a percentage point from last year, "but the unemployment rate may be closer to peaking (or have peaked) earlier than feared." He notes that the Bank signalled further reductions would be contingent on economic data looking soft, so another solid jobs report would reduce urgency to cut rates again next month. "Still, interest rates are at relatively high levels relative to a soft economic backdrop, household spending has shown signs of picking up, but business spending is still very soft," Janzen wrote. "There remain significant risks that U.S. tariffs could be announced before the March policy meeting, and another round of labour market and inflation data still to be released before then." January's rise in employment follows a strong December gain, and is the third monthly increase as jobs growth is no longer being outpaced by population growth. The increase was driven by employment gains in the private sector, where 57,200 jobs were added, while the public sector posted a slight decline (-8,400), although Statistics Canada notes that public sector employment is still up by 107,000 on an annual basis. Self-employed workers rose by 22,900. Manufacturing led the way across sectors, posting a jobs gain of 33,000 in January. CIBC economist Andrew Grantham wrote in a research note on Friday that the January jobs report "is clearly a very positive report once again." However, he notes that the recent drop in the unemployment rate brings it to where it stood in October "and is still consistent with a labour market with plenty of slack." "We continue to think that even lower interest rates will be needed for the economy to fully absorb that slack, particularly given heightened trade uncertainty which could impact hiring decisions ahead." The January jobs data follow a strong December report. In December, Canada's labour market added a net 90,900 jobs, blowing past analyst expectations, while the unemployment rate ticked down to 6.7 per cent. The jobs gain marked the biggest monthly increase in nearly two years, and was almost quadruple what economists were expecting. Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on X @alicjawithaj. Download the Yahoo Finance app, available for Apple and Android.
