Economists predict more rate increases despite weaker job market conditions
The latest report shows that Canada’s economy is facing certain signs of cooling with employment going down for wo consecutive months already.
According to Statistics Canada, the country lost 30,600 jobs in July. Meanwhile, unemployment rate remained unchanged at a historical low of 4.9%.
In spite of the economic weakness, Bay Street economists still predict more rate increases from the Bank of Canada as it tries to restrain the record high inflation.
Here are the forecasts on the BoC’s rate policy from Bay Street amid the recent jobs report.
Carrie Freestone, economist, RBC
“In the nearest future, we will see the national economy cooling down. We are already observing jobless claims growing south of the border, as U.S. labour demand begins to ease. Canada will follow. As the central bank has already raised its key lending rate by 2.25% to 2.5% since March, and we expect at least one more hike by 0.75% in September, the inflation pressure will cool down.”
Douglas Porter, chief economist, BMO Capital Markets
“Although the economic growth is slowing down, the BoC will focus on conditions remaining tight and wages going up. In our opinion, we’ll see one more rate increase next month, although not as huge as the previous 1%. We expect a 0.5% increase.”
Rishi Sondhi, economist, TD Bank
“While the jobs market and economic growth are softening, the central bank is still on his path to reduce the inflation and keep expectations under control. That’s why we believe the Bank will raise its overnight rate above neutral, with it reaching 3.25% by the end of this year.”
Andrew Grantham, senior economist, CIBC Capital Markets
“Although today’s results brought even more uncertainties for policymakers, the central bank will likely keep focusing on the historic low unemployment rate and strong wage growth in order to justify one more non-standard rate increase at its next meeting. Evidence that the economy is slowing due to weaker demand and not to restrained supply, will lead to a pause in this rate hike cycle after the next rise.”