The on-again, off-again tariff torment from the United States is reinforcing opinions about which direction the Bank of Canada’s interest rate policy is going … down.
Market watchers say there is a 75% to 85% chance of another quarter-point drop this week. That would bring the central bank’s policy rate to 2.75%. It is more welcome news for anyone in the market for a mortgage or a renewal.
Most of Canada’s recent economic news has been good. Gross Domestic Product was strong in the fourth quarter, with a 2.6% annualized increase in the value of all goods and services produced by the economy. Expectations had been for a 1.8% increase. Third quarter figures were revised upwards from 1.0% to 2.2%. GDP-per-capita – which is a measure of how well individual Canadians are doing – rose for just the second time in the past seven quarters, rising 0.02%.
Jobs have also been doing well with 211,000 positions created from November to January. Some 76,000 jobs were added in January alone. The unemployment rate is down to 6.6%.
But a corner was turned in February and a sign of weakness has appeared. Job creation collapsed to just 1,100 new positions, well below the 20,000 that had been forecast. Many see it as an early indicator of how the “management-by-mayhem” coming out of the United States is already weighing on Canada’s economy.Analysts say it gives the Bank of Canada plenty of latitude to keep dropping rates.