Bank of Canada Will Leave Rates Unchanged This Year: BMO
Why It Matters
A hold on rates preserves borrowing costs for businesses and consumers, while delaying any easing until 2027 means markets must price in a longer period of monetary stability.
Key Takeaways
- •Canada added 14,000 jobs in March after two months of losses.
- •BMO expects the Bank of Canada to keep rates unchanged in 2024.
- •Housing overhang and weak manufacturing dampen inflation pressures.
- •Wage growth appears modest, unlikely to trigger a wage‑price spiral.
- •Rate cuts not anticipated until 2027, unless a recession emerges.
Summary
The interview with BMO’s fixed‑income head Earl Davis focused on the Bank of Canada’s likely monetary‑policy path for 2024, concluding that the central bank will keep its policy rate on hold for the remainder of the year.
Davis highlighted a modest rebound in the labour market – 14,000 jobs added in March after two months of losses – driven mainly by services. Manufacturing remains weak, hampered by lingering tariff effects and uncertainty around the Kuzma trade negotiations. A deep housing overhang and tepid wage growth further reduce inflationary pressure.
“There’s a big overhang of housing that will keep the Bank on hold,” Davis said, adding that unless unemployment climbs above 7 %, the odds of a rate hike are slim. He also noted that a rate cut is unlikely before 2027, unless a recession forces the Bank’s hand.
For investors, the outlook suggests stable financing costs, continued strength in non‑manufacturing sectors, and potential upside from defence and infrastructure spending that may materialise later in the decade. Monitoring housing inventory and wage trends will be key to spotting any shift in policy.
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