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Interest rate rise this week? Here’s what the economists say

by Steve Randall04 Sep 2018

Improvements in the economy have led to the Bank of Canada’s governor Stephen Poloz vowing to increase interest rates but will September see a hike?

Unlikely, according to two leading economists.

Avery Shenfeld from CIBC Economics says that the BoC will typically announce an increase following strong economic data but that early signs for Q3 do not make a compelling case for a rate rise.

He points out that, while Q2 showed some positive signs, one quarter does not hide an underlying weakness in exports and related capital spending. And inflation is not running away from BoC targets.

Therefore, he expects a hold-steady for interest rates this month, although notes that if NAFTA is agreed then a rate rise won’t be far away.

Over at TD Economics, the expectation is also for Governor Poloz to stand pat this week and to sound a generally positive tone.

“Although the Bank will no doubt continue to emphasize a gradual normalization path with a heavy focus on data dependency, we expect the Bank will be encouraged by economic data over the last six weeks. Notably, the housing market has attained a modicum of stability, while Poloz has consistently stated that the Bank will only incorporate tariffs into their forecast when they are implemented,” the team’s latest report states.

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