Latest news with #Macklem
Yahoo
4 hours ago
- Business
- Yahoo
BofA: Bank of Canada in no rush to ease despite dovish hints
-- Bank of America (NYSE:BAC) Securities said the Bank of Canada's decision to hold its policy rate at 2.75% reflects a wait-and-see approach amid persistent inflation and geopolitical trade uncertainties. The central bank's June 4 announcement kept rates unchanged, in line with expectations, while highlighting 'some unexpected firmness in recent inflation data' and ongoing concerns over U.S. tariffs. BoC Governor Tiff Macklem noted, 'There was a clear consensus to hold policy unchanged as we gain more information.' The central bank's stance suggests it is prioritizing stability while awaiting further data on inflation and growth momentum. Carlos Capistran, economist at BofA Securities, said the Bank's statement and press conference indicated a slightly more dovish tilt, pointing to a willingness to ease policy if economic conditions deteriorate. Macklem remarked that 'members thought there could be a need for a reduction in the policy rate if the economy weakens… and cost pressures on inflation are contained,' signaling potential future cuts. Still, Capistran emphasized the BoC's caution in rushing to cut rates, particularly given sticky core inflation readings. 'Underlying inflation could be a bit firmer than we thought,' Macklem acknowledged during the Q&A, reinforcing the Bank's stance to assess incoming data closely before making changes. Capistran expects the BoC to hold its policy rate at 2.75% at the July meeting and begin cutting rates in the fall. BofA forecasts three 25bp reductions in September, October, and December, which would take the benchmark rate to 2.00% by year-end. Market reaction in the rates complex was notably dovish, with Canadian yields declining across the curve. Capistran said the move validated BofA's tactical positioning, and the firm has since closed its pay June BoC OIS trade at target. In currency markets, USD/CAD slid below 1.37 to a new 2025 low after softer U.S. ISM services data compounded the BoC's caution. Capistran said the pair's near-term direction will be shaped by labor reports from both countries, with a stronger-than-expected Canadian print potentially extending recent CAD gains. Capistran remains skeptical of current market pricing, which implies roughly a 50% chance of a July rate cut. 'We see the probability of a cut as currently overpriced,' he argued, noting that two CPI and two labor reports still lie ahead before the BoC's next policy decision. Related articles BofA: Bank of Canada in no rush to ease despite dovish hints Citadel's Griffin: cost of U.S. default insurance is "unfathomable" Tariffs, oil prices, and a stronger Loonie drag Canada's April exports down 10.8% 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
a day ago
- Business
- Yahoo
As Bank of Canada holds rates, experts say a cut alone won't stop an economic slowdown
The Bank of Canada held interest rates at 2.75 per cent on Wednesday, pointing to a mixed bag of unexpectedly strong data and the uncertainty of U.S. tariffs as reason for the hold — and some experts say, going forward, rate cuts alone won't be enough to stop an economic slowdown. In his opening remarks to reporters, governor Tiff Macklem characterized the Canadian economy as "softer but not sharply weaker" and said the central bank's governing council was in agreement about today's rate decision. The decision marks the second consecutive hold since March. Economists had largely pivoted from initial expectations the central bank would cut the interest rate by 25 basis points after the first-quarter GDP came in at an annualized rate of 2.2 per cent last week, which was stronger than anticipated. That strength was largely due to a surge in exports, with businesses stocking up on inventory before U.S. President Donald Trump's initial round of tariffs went into effect in the spring. But Macklem was quick to curb any enthusiasm around the latest GDP reading, saying that "the first quarter borrows economic strength from the future, so the second quarter is expected to be much weaker." Likewise, recent headline inflation showed that price growth had slowed to 1.7 per cent in April, largely due to the end of the consumer carbon tax. However, core inflation — the Bank of Canada's preferred measure of price growth, because it strips out sector volatility and one-time tax changes — crept up above three per cent, well beyond the Bank of Canada's target of two per cent. "That has got our attention," Macklem told reporters, saying the uptick "does make you think that underlying inflation could be a little firmer than we thought." Even if the central bank had cut rates by 25 basis points, it wouldn't have much of an effect on housing, said Toronto real estate broker John Pasalis in an interview with CBC News. "The housing market right now is stalling largely because of all of the economic uncertainty," Pasalis said. "Lower rates are not going to push people back into buying a home if they're worried they're going to lose their jobs." The central bank noted Wednesday that national housing activity had declined in the first quarter, mostly because of a drop in the resale market. National prices are down slightly on a year-to-year basis, too. Pasalis said he doesn't expect activity to pick up this summer, though that could change by the fall, should the Bank of Canada opt to cut rates to two per cent over the next several meetings. Still, lower interest rates need to be matched with "more clarity on the economy, on the trade war," he said, to stimulate the housing market. "I don't think it's an affordability issue right now. I think the big issue is just lack of confidence." Andreea Bourgeois, director of economics at the Canadian Federation of Independent Business in Moncton, N.B., said she thinks small businesses are probably "OK" with the decision to hold the interest rate. Rate cuts always help small businesses, Bourgeois said. What they're really looking for at this point, however, is "a sign that the bank believes the economy can grow and a bit of a push for businesses to actually invest and to not lay off people," she said. "'We want businesses to spend, we want businesses to invest, we want to stimulate demand. [That's] the sign that would be super important for small businesses." The Bank of Canada noted in its first-quarter business outlook survey, released in April, that businesses had expressed less confidence in the direction of the economy, with the firms surveyed less eager to invest and hire because of the trade conflict with our U.S. neighbours. "They're not looking yet to cut down on their business products. They're not looking to lay off in mass," acknowledged Bourgeois. "But you don't see the other behaviour, either," she said, referring to investment and hiring, which she argued shows a lack of optimism in the economy. The central bank chose a cautious approach on Wednesday, and its decision to hold off on a rate cut is a risky one, said Royce Mendes, managing director and head of macro strategy at Desjardins. The hold sends the message that there's "a reluctance to support the economy," and could lead businesses and households to make different financial and investment decisions, Mendes said. "They start to pull back because they worry that there's no safety net in sight. Or businesses decide not to invest more because they think, 'Well, no one's here to help us with this trade war.' And I think those are the risks that the Bank of Canada has taken by holding rates steady today." Macklem didn't rule out a rate cut at the central bank's meeting in July, should economic growth slow and inflation pressures ease. But he said the governing council, while in agreement about Wednesday's decision, had so far shared a "diversity of views" when it came to the future. WATCH | Will uncertainty tilt the Bank of Canada toward a future rate cut?: "Faced with unusual uncertainty, [the council] is proceeding carefully, with particular attention to the risks," Macklem said in his remarks. "This means we are being less forward-looking than usual." Leslie Preston, managing director and senior economist at TD Economics, said that the uptick in core inflation — competing with job loss, weaker demand in the domestic economy and a soft housing market — put the Bank of Canada "in a bind." "We expect that barring a trade negotiation miracle with the Trump administration, Canada's economy is likely to tip into recession this year, and more interest rate cuts will be required," Preston wrote. 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
Vancouver Sun
a day ago
- Business
- Vancouver Sun
Bank of Canada holds interest rate at 2.75% again as 'uncertainty remains high'
The Bank of Canada decided to hold its interest rate on Wednesday, saying uncertainty remains high and it will continue to assess the impact of U.S. tariffs on the economy. 'The Canadian economy is softer but not sharply weaker. And we've seen some firmness in recent inflation data,' said Bank of Canada governor Tiff Macklem , in prepared remarks in Ottawa. 'Against this backdrop, we decided to hold the policy rate unchanged as we continue to gain more information on U.S. trade policy and its impacts.' Macklem added that the trade conflict with the United States remains 'the biggest headwind facing the Canadian economy.' Start your day with a roundup of B.C.-focused news and opinion. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Sunrise will soon be in your inbox. Please try again Interested in more newsletters? Browse here. On Tuesday, U.S. President Donald Trump signed an executive order doubling tariffs on steel and aluminum from 25 per cent to 50 per cent, with the levies taking effect on Wednesday. Tariffs on Canadian autos, energy and other goods remain in place, although many items are exempted under the Canada–United States–Mexico Agreement (CUSMA) . Trade and security negotiations between the U.S. administration and the Canadian government are ongoing. On Wednesday, Macklem singled out inflation in the decision. Headline inflation was 1.7 per cent in April but, excluding the removal of the carbon tax, came in higher than expected at 2.3 per cent. Core inflation — the central bank's preferred measure when making its monetary policy decisions — also heated up. 'There is some unusual volatility in inflation, but these measures suggest underlying inflation could be firmer than we thought,' said Macklem. 'Higher core inflation can be partly attributed to higher goods prices, including food, and may reflect effects of trade disruption.' The central bank said it will continue to monitor how inflationary pressures are evolving, as its recent survey data indicated businesses intend to pass the higher tariff costs onto consumers. Growth in the first quarter was also above central bank's expectations, with gross domestic product rising 2.2 per cent. Growth at the beginning of the year was boosted by a surge in Canadian exports to the United States, as businesses raced to beat Trump's tariffs. The central bank expects growth to be considerably weaker in the second quarter. 'Exports and inventories were strong but final domestic demand was roughly flat,' said Macklem. 'Consumer spending slowed from a very strong fourth-quarter pace, but continued to grow despite a sharp drop in consumer confidence.' The labour market deteriorated in April, with the unemployment rate climbing to 6.9 per cent. This was due to a a drop in employment in trade-intensive sectors such as manufacturing. 'So far, employment has held up across sectors that are less exposed to trade,' said Macklem. 'But businesses are generally telling us that they plan scale back hiring.' While the governor said there was a clear consensus to hold the policy rate Wednesday, there was a 'diversity of views' among the seven members of the governing council for the path forward for interest rates. 'On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued U.S. tariffs and uncertainty, and cost pressures on inflation are contained,' said Macklem. 'Faced with unusual uncertainty, governing council is proceeding carefully, with particular attention to the risks.' • Email: jgowling@ Bookmark our website and support our journalism: Don't miss the business news you need to know — add to your bookmarks and sign up for our newsletters here .
Business Recorder
a day ago
- Business
- Business Recorder
Bank of Canada holds key rate steady, but says a future cut is possible
OTTAWA: The Bank of Canada on Wednesday held its key benchmark rate at 2.75%, citing the need to probe the effects of U.S. trade policy, but said another cut might be necessary if the economy weakened in the face of tariffs. The decision marks the second time in a row that the central bank has remained on the sidelines after an aggressive cutting cycle which shrunk rates by 225 basis points over nine months. 'The trade conflict initiated by the United States remains the biggest headwind facing the Canadian economy,' Governor Tiff Macklem told a news conference, describing U.S. trade policy as highly unpredictable. 'There was a clear consensus to hold policy unchanged as we gain more information,' he said. U.S. President Donald Trump on Wednesday doubled the tariff on imports of Canadian steel and aluminum to 50%. The bank says it is weighing upward pressure on inflation from higher prices and downward pressure from sluggish growth. Macklem said the Canadian economy had been softer but not sharply weaker, while noting that underlying inflation might be stronger than the bank had suspected. 'On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued U.S. tariffs and uncertainty, and cost pressures on inflation are contained,' he said. Canada's annual inflation rate fell to 1.7% in April due to a drop in energy prices, but closely tracked core measures of inflation rose above the bank's target range of 1% to 3% in the same month. 'Higher core inflation can be partly attributed to higher goods prices, including food, and may reflect the effects of trade disruption,' Macklem said. Economists had predicted the bank would most likely hold its key policy rate in June, seeking to prevent higher inflation. Macklem said recent surveys showed consumers were bracing for higher prices and many businesses say they intend to pass on tariff costs. Lingering uncertainty on the impact of tariffs, the outcome of trade negotiations and new trade actions means the bank will be less forward looking, Macklem said, repeating his comments from April. 'Faced with unusual uncertainty, Governing Council is proceeding carefully, with particular attention to the risks,' he said, adding that the BoC would continue to support economic growth while ensuring inflation remained under control. First quarter growth was better than expected but the business investment and domestic spending were largely subdued. Economists predict this trend is likely to continue, and Macklem said second quarter growth would be substantially weaker.
a day ago
- Business
Bank of Canada holds interest rate at 2.75%
Headlines Latest News Podcasts (new window) Bank of Canada governor Tiff Macklem and senior deputy governor Carolyn Rogers give a statement and answer questions about the central bank's interest rate announcement. Photo: The Canadian Press / Justin Tang Rate decision comes amid economic uncertainty and tariff tensions. Début du widget Widget. Passer le widget ? Fin du widget Widget. Retourner au début du widget ? The Bank of Canada is holding the interest rate at 2.75 per cent for the second time in a row. Bank of Canada Governor Tiff Macklem has a tough balancing act in front of him with this rate decision as United States tariffs still hang in the balance. In March, the central bank cut its rate by 25 basis points to 2.75 per cent. The bank held the 2.75 per cent rate in April to control inflation, noting Canada's trade war with the U.S. could lead to a recession. There has been speculation about whether Macklem would hold that rate or cut it further to offset a rise in prices due to tariffs. U.S. President Donald Trump signed an executive order on Tuesday hiking tariffs on steel and aluminum — two key Canadian industries — to 50 per cent. Macklem is holding a news conference about the decision at 10:30 a.m. ET. Peter Armstrong (new window) All eyes now turn to the bank's next decision on July 30. That release comes with a full updated set of forecasts. Today, the bank said it's holding while it gains more information on U.S. trade policy and its impacts. The bank hopes to have more information about trade policy by the time we meet here again next month. Macklem's remarks Jenna Benchetrit (new window) In his pre-published remarks, Macklem addresses U.S. tariffs — specifically that China and the U.S. have stepped back from high tariffs, that negotiations are underway between the U.S. and other countries and that the market turmoil we saw in April has receded. However, the outcomes of the trade negotiations are highly uncertain, tariffs are well above their levels at the beginning of 2025 and new trade actions are still being threatened, he says. Sounds like trade uncertainty will be a major theme during Macklem's news conference. Industry leaders say federal government also needs to address unfair trade practices — like steel dumping. Despite growing interest in the model, experts say there are hurdles to building new units. First plumes reached Mediterranean on May 18, with more arriving this week. Bill C-2 allows officials to cancel, suspend or change immigration documents in the 'public interest'. Companies are using AI hiring bots to screen, shortlist and talk to job candidates. Advocates say the …
