Bank of Canada governor Mark Carney is expected to cut interest rates by half-a-percentage point tomorrow not because he has to, but because he can.
Talk of recession has subsided in Canada and the bank’s overnight rate is already a toothless 3.5 per cent, helping to keep consumer demand reasonably robust.
Prices are rising by about 8 per cent annually in China, 4 per cent in the U.S., 3.6 per cent in Europe. In Canada, the overall inflation dipped for the fourth straight month to 1.4 per cent for March.
“I’m grudgingly calling for a 50 basis point (half point) drop on Tuesday, but I’m not convinced that is the right call,” says Douglas Porter, deputy chief economist with the Bank of Montreal.
“There’s lots of signs the economy is holding up. Auto sales look to have posted their strongest quarter on record, housing starts had their second best quarter in 20 years and more than 100,000 jobs were added.”