When Statistics Canada issued its monthly jobs report last Friday, the data increased the chances of a larger interest rate cut by the Bank of Canada this week.
Prior to the report, economists at the major chartered banks had divergent views on how the central bank was going to proceed in making its regular interest rate decision set for this week. Some were saying a quarter point reduction…others felt we were in line for a half-point cut.
The sticking point was employment. Was the economy still producing new jobs at a strong enough pace or had it lost steam? The final report was not especially definitive but was enough to push more economists towards the aggressive half-percentage-point reduction option. One says there is now an 80-percent chance that rates will drop by 50-basis points this week.
The point here is that inflation is no longer the issue. That has been tamed but, did the central bank over do it …so much so that we now need to stimulate the economy by reducing rates faster?
