Bank of Canada to consider interest rates on Tuesday

by Richard Kilner

Story link: Bank of Canada to consider interest rates on Tuesday

Tomorrow Mark Carney, the Bank of Canada’s new chief, will decide what change to make to Canadian interest rates.

Opinion amongst Canadian analysts is uniformly in favour of a cut and Carney already strongly indicated rates will fall, leaving only the matter of the degree of the reduction in doubt.

It is thought that the rate will fall either by half a point to 3.5% or by a quarter point to 3.75%.

Sal Guatieri, of BMO Capital Markets, believes that should there be a quarter point reduction it would seem insignificant compared to the large rate slashing that has occurred recently in the US.

Karen Cordes, an economist with Scotia Capital, believes that Canada’s moderate rate of inflation gives the central bank enough wiggle room to afford a half point cut.

Cordes went on to forecast that the final quarter of last year saw growth of merely 1.2%, with negative growth in December strengthening the case for decreased interest rates.