Paul Martin commentary
This is the economics version of treading water.
The Bank of Canada will set its benchmark rate on Wednesday and economists generally view this as a stay-pat decision.
We have issues pushing on both sides of the raise-or-don’t-raise equation. First, Canada is in recession. That usually means lower the rates. But we’re also still wrestling with inflation, especially transportation costs related to the Mid-East war. That usually means raise rates.
We also had strong job numbers last week. That should mean higher rates. And the Canadian dollar is falling which effectively imports inflation: that should trigger a raise-the-rates scenario.
But none of these factors seems to be enough for the central bank to move off its current wait-and-see position so we should expect no change.
Farther out, though, all these factors pointing towards higher rates suggest the longer-term prospect points to an increased likelihood of an interest rate increase before we see any further relief.
