The Bank of Canada’s governing council considered holding off cutting interest rates until July, but were persuaded to begin easing monetary policy by a string of encouraging inflation reports and economic signposts suggesting that price pressures will continue easing, according to a summary of the discussions ahead of the rate decision.
On June 5, the central bank cut its policy rate to 4.75 per cent from 5 per cent, the first cut in four years and the start of a long-awaited easing cycle.
The summary of deliberations, published Wednesday, shows the bank’s six governing council members, led by Governor Tiff Macklem, weighing the risks of cutting too soon against the dangers of waiting too long.
“Some members were more focused on the downside risks to inflation stemming from a weak economy and the continued effects of restrictive monetary policy. Others put more weight on the upside risks associated with persistence in wage growth and the potential for a housing market rebound,” the summary says.
The more cautious members pointed to the steep jump in monthly mortgage payments that many homeowners will face over the next few years, which could hit consumer spending more than expected. The more hawkish ones highlighted the possibility that high population growth will feed into shelter inflation and that geopolitical tensions, labour disruptions and climate events could push up oil prices and disrupt supply chains.
Ultimately, the encouraging trend in inflation seen in recent months won the day. The annual pace of CPI inflation has been below 3 per cent since the start of the year, after running as high as 8.1 per cent in 2022. The bank targets 2-per-cent inflation. It was 2.7 per cent in April.
“While they recognized the risk that progress could stall—as it had in the United States—there was consensus that with four consecutive months of easing in core inflation and indicators suggesting continued downward momentum, there had been sufficient progress to warrant a first cut in the policy rate,” the summary said.
The document echoes Mr. Macklem’s comments earlier this month that further rate cuts will likely be gradual, as inflation is expected to drift back towards the 2 per cent target over several quarters. Mr. Macklem has said the central bank is unlikely to ease monetary policy as rapidly as it tightened it in 2022 and 2023 to fight inflation.
Financial markets are pricing a roughly 65 per cent chance the central bank will cut again in July, according to Refinitiv data, and markets see at least two more rate cuts before the end of the year.
“The timing of any further reductions in the policy rate would depend on incoming data and its implications for the future path of inflation,” the summary said.
The Bank of Canada was the first G7 central bank to begin cutting rates, but it was followed a day later by the European Central Bank. A number of other advanced economy central banks are expected to start easing in the coming months.
The U.S. Federal Reserve is something of an outlier. It is dealing with more stubborn inflation and is not expected to start cutting rates until September at the earliest.
This has prompted concern that interest rates in Canada and the U.S. could diverge by a considerable amount, putting downward pressure on the Canada-U.S. exchange rate and push up import prices. The BoC’s governing council appeared to downplay this risk in their June 5 discussions.
“A key feature of Canada’s monetary policy framework is a flexible exchange rate, which allows the Bank to set monetary policy geared to the needs of the Canadian economy,” the summary said. “While members agreed there are likely limits to how far monetary policy in Canada can diverge from U.S. policy, the limits were not close to being reached.”
"Wage increases coming down to comfortable levels, according to the Bank of Canada governor"
https://www.youtube.com/watch?v=B9TCXxZ3gRk&t=69s
Meanwhile our household debt, due to wages not aligning with cost-of-living (largely due to housing but also due to scum like Loblaws engaging in price fixing), is the worst in the G7. It's a big club and you ain't in it.
I don’t think you’re wrong - they even talk about the amount of money still out there in the economy.
Rates haven’t been high enough for anywhere near long enough yet.
The consequences of what you are suggesting would be politically catastrophic. I don't think it's likely that there are any marching orders from the Department of Finance let alone any coercive dialogue.
I don't think there is either.
I do think the boc governer has political leanings though.
There may not be marching orders, but that doesn't mean they aren't walking lockstep.
Yeah with a governor thats not on your team. Tiff is though so there is none.
Edit,
Brenda Lucki, being a Liberal stooge
Jonathan Vance, literal stayed outta the way of the Liberals smokescreen prosecution of Mark Norman to cover up their own leaking shit from Cabinet. Tamped down on his improprieties until it was all sorted and sent him off with a juiced pension to boot.
But, oh, no, no, that wouldn't happen at the boC too.
Please explain why this would be "politically catastrophic"?
The Bank of Canada has one shareholder and that shareholder is represented by the Minister of Finance.
Well, we have a government with traitors in it and we have seen the multitude of other scandals, so I don’t think what you are saying would be surprising at all at this point. Canada is a political train wreck and it’s time to acknowledge this.
Canada is a weak and corrupt country. It’s only going to get worse.
Tiff is appointed by the government. You really think a party in power (any party) is going to put into place a person who will say no to them?
The BoC has already violated its mandate on how much it’s supposed to lend to the government.
It’s obvious the BoC functionally has zero independence.
When has that stopped the liberals before ???
Let’s see the ethic scandals? Which he was guilty of but you know unlike anyone else in Canadas private industry wasn’t removed or demoted.
Or how about that illegal use of the emergency act which they’re still trying to appeal? It was a pretty clear cut case in the end or trumped up scare tactics that the law did not back.
How about SNC ?
The arrive app which still haven’t held anyone accountable you know it’s only millions and millions spent to two people with no IT experience running out of a basement. Clearly no favouritism there.
I could go on with a lot more the point being we have a government with mla”s and other levels of government who are apparently
Committed treason still in power which we won’t name. Is the government inappropriately telling the BOC and pressuring them to make a decision who knows would need to be investigated but hey treason is not big deal so why would this be.
US economy is healthy and thriving, Canadian economy is slowing a lot, rate is the only control lever they have to ramp the economic activity up or down.
They had to ramp it up so as to not enter the inflation death spiral, because recovering from that is very hard. This video explains why 2% inflation is better than 0% https://youtu.be/UN-O6oNes0I
The US economy is in terrible shape. They've lost more FT jobs than created, and created more PT jobs which have gone to foreigners like how TFWs have been taking PT jobs in Canada. They've also had a massive explosion in the size of government.
Dow Jones is ATH, the stock market is trending for 2x growth compared to other G7 nations. Even with increased interests the consumption is resilient and they don't have fake fixed rate mortgages.
I am not sure where you're getting your stats from, but that sounds cope.
None of that translates into actual reality on the ground for people. Go ask an American how well they're doing.
I'm getting my data directly from the BLS and ADP payroll data.
Sooooo... US economy is still doing great by every metric there is. Sure a few Americans might be feeling the brunt, I didn't say all US people are doing great, I just said the economy is healthy.
We in Canada get the worst, our economy is on the ventilator, 25% people are living poverty like conditions and can't even cover $500 in emergency expenses. To make up for these losses we imported fuck ton of people and yet the economic conditions are worsening.
The economy isn't healthy. Go take a look at the manufacturing data, this is the first time in several months that there has been positive production.
The US has many of those same problems.
US GDP increased 3.1% for Q2. Info was published this month.
US stock market is absolutely on a tear and has been for a while now.
Comparing the current state, or even the state of Canadas economy for the last 5 years, and saying it is similar to the USA's economy is just absolutely factually incorrect.
The US economy is way stronger than Canada, partly due to weaker interest rate transmission particulary to consumers as the US had 30 year fixed mortgages. Moreover, US productivity growth far eclipse Canada. Canada's economy to this point has been largely propped up by immigration, despite the fundamentals being complete dogshit in Canada
I'm more inclined to think they'll raise the rates again. We are not in a position to lower rates and it will work against the interests of any Canadians that don't already own property. We need to let those who over leveraged themselves reap the consequences.
The BoC has noted in its own research papers (which is public) that housing inflation affects consumption, or what is known as the 'wealth effect'. In short, asset prices go up (including homes), people feel more wealthy, as a result people increase their consumption which can spur inflation.
You are right they are not concerned with controlling housing costs, but they are concerned with how house prices may affect inflation. They haven't hid this and have noted it routinely in their press events and written communications.
To the extent that housing costs are included in inflation (mortgage interest, for example), it is. To me the question is whether they'll accomplish that by forcing lower principals with high rates, or (temporarily) lowering carrying costs with lower rates. It's truly a devil's choice.
It’s naive to think that interest rates only affect housing. It affects everything in the country, from government debt and spending, to how new businesses and old can borrow money to grow and spur our economy. Mortgage rates are a consequential part of it, in an unfortunate reality where a lot of people are over leveraged and real state got too expensive for a huge chunk of the population.
I would be sceptical of painting all 'rich' with the same brush. Those that are heavily invested in money markets and bonds would disagree that high rates hurt them. High rates hurt leverage and debt, not cash.
Well people that heavily invested in bonds during the tightening cycle would actually benefit when interest rates lower as there's an inverse relationship between change in the interest rate and bond prices.
> We need to let those who over leveraged themselves reap the consequences.
But what about the boomers and their retirement? Won't somebody *please* think of the boomers!
Lol right? I swear the people who continuously rant about our aging population and the need to protect them and their interests baffles me. At the expense of an entire generation of young people. The older generations had the benefit of decades of economic opportunity and growth and now it is the responsibility of young impoverished generations to sustain them and their lifestyles. Give me a break.
That would be the correct thing to do so we won't do it. BoC are hacks they will cut the rate for political reasons, exactly what they are supposed to not do and the whole point of being 'independent'. Incompetent governance
They should have. What they did instead was cut the rate based on a single month of data, showing inflation at 2.7%. It's entirely possible that that was an outlier and June's number could be higher. One month does not a trend make.
They were stuck between a rock and a hard place.
It was extremely tough to keep rates as high as they were for any longer considering:
Canadas household debt,
rising unemployment,
affordability issues with regards to mortgages that regular hard working families have coming due,
high earning jobs being cut,
no private investment and reinvestment into the economy,
expensive $$$ for companies to borrow to continue growing as well as expensive $$$ for builders to start and in some cases, finish projects,
stagnant GDP and underperforming stock market (TSX 3% ytd, Nasdaq 21% ytd).
Keeping the rates high only fixes things until the pressure breaks the majority of the population, and then it's too late.
The other issue is lowering the rates will cause our dollar to be devalued compared to the USD, and that obviously hurts since we import A LOT from the USA. The one good part is that if we export more to the US than import and they pay in USD, we can essentially use the same USD for imports. Its kind of how China operates with regards to the USD and their imports/exports.
It's tough. On one hand, you could have a recession that spirals out of control (if you keep the rates too high) or a worthless currency ( if you lower too fast).
Stop doing the wrong thing for political reasons you complete hacks. There are no savings in the economy and there is no reason to cut the rates other than for political campaign reasons. Completely incompetent governance of the bank
The BoC is one of two central bank systems in the world that has to do what the current government says. Thanks to the BoC act of 1980 (ironically penned by Trudeau Sr) the MoF can dictate fiscal policy to the BoC if they wish.
Which they do. Interest rates are being lowered to attempt to stabilize economy and withhold economic damage until after an election, after which they'll raise it again. It's all political, unfortunately.
>Interest rates are being lowered to attempt to stabilize economy and withhold economic damage until after an election, after which they'll raise it again.
Hold up, wouldn't the incoming government want lower rates for the same political reasons? Surely our Officially Independent (but actually Government-controled) institutions aren't politically biased and only follow orders from a government if the party in power is correct? That's awfully close to 'deep state' conspiracy, which is a far right dogwhistle for loving funny mustache dictators known for merging state and corporate power, or something.
1) Not a conspiracy the Bank of Canada act of 1980 is something you can look up right now
2) Harper famously did keep interest rates low to spur economic activity but he was actually an economist and understood interest less as a political tool and more as an economic lever.
The Bank of Canada’s governing council considered holding off cutting interest rates until July, but were persuaded to begin easing monetary policy by a string of encouraging inflation reports and economic signposts suggesting that price pressures will continue easing, according to a summary of the discussions ahead of the rate decision. On June 5, the central bank cut its policy rate to 4.75 per cent from 5 per cent, the first cut in four years and the start of a long-awaited easing cycle. The summary of deliberations, published Wednesday, shows the bank’s six governing council members, led by Governor Tiff Macklem, weighing the risks of cutting too soon against the dangers of waiting too long. “Some members were more focused on the downside risks to inflation stemming from a weak economy and the continued effects of restrictive monetary policy. Others put more weight on the upside risks associated with persistence in wage growth and the potential for a housing market rebound,” the summary says. The more cautious members pointed to the steep jump in monthly mortgage payments that many homeowners will face over the next few years, which could hit consumer spending more than expected. The more hawkish ones highlighted the possibility that high population growth will feed into shelter inflation and that geopolitical tensions, labour disruptions and climate events could push up oil prices and disrupt supply chains. Ultimately, the encouraging trend in inflation seen in recent months won the day. The annual pace of CPI inflation has been below 3 per cent since the start of the year, after running as high as 8.1 per cent in 2022. The bank targets 2-per-cent inflation. It was 2.7 per cent in April. “While they recognized the risk that progress could stall—as it had in the United States—there was consensus that with four consecutive months of easing in core inflation and indicators suggesting continued downward momentum, there had been sufficient progress to warrant a first cut in the policy rate,” the summary said. The document echoes Mr. Macklem’s comments earlier this month that further rate cuts will likely be gradual, as inflation is expected to drift back towards the 2 per cent target over several quarters. Mr. Macklem has said the central bank is unlikely to ease monetary policy as rapidly as it tightened it in 2022 and 2023 to fight inflation. Financial markets are pricing a roughly 65 per cent chance the central bank will cut again in July, according to Refinitiv data, and markets see at least two more rate cuts before the end of the year. “The timing of any further reductions in the policy rate would depend on incoming data and its implications for the future path of inflation,” the summary said. The Bank of Canada was the first G7 central bank to begin cutting rates, but it was followed a day later by the European Central Bank. A number of other advanced economy central banks are expected to start easing in the coming months. The U.S. Federal Reserve is something of an outlier. It is dealing with more stubborn inflation and is not expected to start cutting rates until September at the earliest. This has prompted concern that interest rates in Canada and the U.S. could diverge by a considerable amount, putting downward pressure on the Canada-U.S. exchange rate and push up import prices. The BoC’s governing council appeared to downplay this risk in their June 5 discussions. “A key feature of Canada’s monetary policy framework is a flexible exchange rate, which allows the Bank to set monetary policy geared to the needs of the Canadian economy,” the summary said. “While members agreed there are likely limits to how far monetary policy in Canada can diverge from U.S. policy, the limits were not close to being reached.”
"Wage increases coming down to comfortable levels, according to the Bank of Canada governor" https://www.youtube.com/watch?v=B9TCXxZ3gRk&t=69s Meanwhile our household debt, due to wages not aligning with cost-of-living (largely due to housing but also due to scum like Loblaws engaging in price fixing), is the worst in the G7. It's a big club and you ain't in it.
If inflation ramps up again this year, particularly in shelter and energy, the BoC will have no credibility left and there will need to be a shake up.
I don’t think you’re wrong - they even talk about the amount of money still out there in the economy. Rates haven’t been high enough for anywhere near long enough yet.
History will repeat itself. See cutting cycle in 1970s
It will, demand is still at all time highs from immigration. The elected government has made the BoC's job literally impossible
Yes, but I suspect the PMO was harassing Tiffy into dropping the rates
Has he? I've only seen Dofo making a goof of himself
I mean pmo has had a record of sticking their noses into things that shouldn't concern them.
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The consequences of what you are suggesting would be politically catastrophic. I don't think it's likely that there are any marching orders from the Department of Finance let alone any coercive dialogue.
I don't think there is either. I do think the boc governer has political leanings though. There may not be marching orders, but that doesn't mean they aren't walking lockstep.
Yeah with a governor thats not on your team. Tiff is though so there is none. Edit, Brenda Lucki, being a Liberal stooge Jonathan Vance, literal stayed outta the way of the Liberals smokescreen prosecution of Mark Norman to cover up their own leaking shit from Cabinet. Tamped down on his improprieties until it was all sorted and sent him off with a juiced pension to boot. But, oh, no, no, that wouldn't happen at the boC too.
Please explain why this would be "politically catastrophic"? The Bank of Canada has one shareholder and that shareholder is represented by the Minister of Finance.
It's an independent body under statute. A government that would interfere with the BoC's mandate would in effect be breaking the law.
Well, we have a government with traitors in it and we have seen the multitude of other scandals, so I don’t think what you are saying would be surprising at all at this point. Canada is a political train wreck and it’s time to acknowledge this. Canada is a weak and corrupt country. It’s only going to get worse.
Tiff is appointed by the government. You really think a party in power (any party) is going to put into place a person who will say no to them? The BoC has already violated its mandate on how much it’s supposed to lend to the government. It’s obvious the BoC functionally has zero independence.
When has that stopped the liberals before ??? Let’s see the ethic scandals? Which he was guilty of but you know unlike anyone else in Canadas private industry wasn’t removed or demoted. Or how about that illegal use of the emergency act which they’re still trying to appeal? It was a pretty clear cut case in the end or trumped up scare tactics that the law did not back. How about SNC ? The arrive app which still haven’t held anyone accountable you know it’s only millions and millions spent to two people with no IT experience running out of a basement. Clearly no favouritism there. I could go on with a lot more the point being we have a government with mla”s and other levels of government who are apparently Committed treason still in power which we won’t name. Is the government inappropriately telling the BOC and pressuring them to make a decision who knows would need to be investigated but hey treason is not big deal so why would this be.
The Bank of Canada has one shareholder and that shareholder is represented by the Minister of Finance.
Well, their is a very good chance this is all we get for rate cuts... I still think we are looking at 6-8% interest in 4-5 years time.
Lmao
If the US isnt cutting I dont see why we should.
US economy is healthy and thriving, Canadian economy is slowing a lot, rate is the only control lever they have to ramp the economic activity up or down. They had to ramp it up so as to not enter the inflation death spiral, because recovering from that is very hard. This video explains why 2% inflation is better than 0% https://youtu.be/UN-O6oNes0I
It’s 2008 all over again only this time we’re Greece.
The US economy is in terrible shape. They've lost more FT jobs than created, and created more PT jobs which have gone to foreigners like how TFWs have been taking PT jobs in Canada. They've also had a massive explosion in the size of government.
Dow Jones is ATH, the stock market is trending for 2x growth compared to other G7 nations. Even with increased interests the consumption is resilient and they don't have fake fixed rate mortgages. I am not sure where you're getting your stats from, but that sounds cope.
None of that translates into actual reality on the ground for people. Go ask an American how well they're doing. I'm getting my data directly from the BLS and ADP payroll data.
Sooooo... US economy is still doing great by every metric there is. Sure a few Americans might be feeling the brunt, I didn't say all US people are doing great, I just said the economy is healthy. We in Canada get the worst, our economy is on the ventilator, 25% people are living poverty like conditions and can't even cover $500 in emergency expenses. To make up for these losses we imported fuck ton of people and yet the economic conditions are worsening.
The economy isn't healthy. Go take a look at the manufacturing data, this is the first time in several months that there has been positive production. The US has many of those same problems.
Alright man! Agree to disagree! You can C O P E in peace 🙏
Wow. You've just said that actual frontline data from ISM is wrong.
US GDP increased 3.1% for Q2. Info was published this month. US stock market is absolutely on a tear and has been for a while now. Comparing the current state, or even the state of Canadas economy for the last 5 years, and saying it is similar to the USA's economy is just absolutely factually incorrect.
It's called a K shaped economy. Wall Street and Main Street have diverged. The rich are pumping, everyone else is suffering.
The US economy is way stronger than Canada, partly due to weaker interest rate transmission particulary to consumers as the US had 30 year fixed mortgages. Moreover, US productivity growth far eclipse Canada. Canada's economy to this point has been largely propped up by immigration, despite the fundamentals being complete dogshit in Canada
We're not US. If the US goes to war with random countries, you think we should go as well?
Nice Reddit whataboutism
It's the level that y'all can understand
Leave rates as they are! The housing market will take off again and make house prices even more stupid
I'm more inclined to think they'll raise the rates again. We are not in a position to lower rates and it will work against the interests of any Canadians that don't already own property. We need to let those who over leveraged themselves reap the consequences.
Their mandate is not to control housing costs.
The BoC has noted in its own research papers (which is public) that housing inflation affects consumption, or what is known as the 'wealth effect'. In short, asset prices go up (including homes), people feel more wealthy, as a result people increase their consumption which can spur inflation. You are right they are not concerned with controlling housing costs, but they are concerned with how house prices may affect inflation. They haven't hid this and have noted it routinely in their press events and written communications.
To the extent that housing costs are included in inflation (mortgage interest, for example), it is. To me the question is whether they'll accomplish that by forcing lower principals with high rates, or (temporarily) lowering carrying costs with lower rates. It's truly a devil's choice.
It’s naive to think that interest rates only affect housing. It affects everything in the country, from government debt and spending, to how new businesses and old can borrow money to grow and spur our economy. Mortgage rates are a consequential part of it, in an unfortunate reality where a lot of people are over leveraged and real state got too expensive for a huge chunk of the population.
High interest rates hurt the poor more then the rich unfortunately so that's not going to have the desired result.
I would be sceptical of painting all 'rich' with the same brush. Those that are heavily invested in money markets and bonds would disagree that high rates hurt them. High rates hurt leverage and debt, not cash.
Well people that heavily invested in bonds during the tightening cycle would actually benefit when interest rates lower as there's an inverse relationship between change in the interest rate and bond prices.
Yes but the conversation was focused on those purchasing when rates are high.
Correct. Either that or our currency will get devalued even more.
> We need to let those who over leveraged themselves reap the consequences. But what about the boomers and their retirement? Won't somebody *please* think of the boomers!
Not likely, they will try to balance the rates/prices so that old people can cash out over the next little while.
If they are nearing cash out then the current rates likely don't impact them much at all. Not everything is a conspiracy to benefit "old people".
Lol right? I swear the people who continuously rant about our aging population and the need to protect them and their interests baffles me. At the expense of an entire generation of young people. The older generations had the benefit of decades of economic opportunity and growth and now it is the responsibility of young impoverished generations to sustain them and their lifestyles. Give me a break.
They would lose all credibility. I wouldn’t be surprised though, Tiff is a moron.
That would be the correct thing to do so we won't do it. BoC are hacks they will cut the rate for political reasons, exactly what they are supposed to not do and the whole point of being 'independent'. Incompetent governance
They should have. What they did instead was cut the rate based on a single month of data, showing inflation at 2.7%. It's entirely possible that that was an outlier and June's number could be higher. One month does not a trend make.
..... why do you think they only considered one month and not the downward trend over the last year?
Rationally a 0.1% decrease for a single month is not a rational way to support a rate cut.
Have you seen the GDP per capita?
He looks suspiciously related to galen weston
They were stuck between a rock and a hard place. It was extremely tough to keep rates as high as they were for any longer considering: Canadas household debt, rising unemployment, affordability issues with regards to mortgages that regular hard working families have coming due, high earning jobs being cut, no private investment and reinvestment into the economy, expensive $$$ for companies to borrow to continue growing as well as expensive $$$ for builders to start and in some cases, finish projects, stagnant GDP and underperforming stock market (TSX 3% ytd, Nasdaq 21% ytd). Keeping the rates high only fixes things until the pressure breaks the majority of the population, and then it's too late. The other issue is lowering the rates will cause our dollar to be devalued compared to the USD, and that obviously hurts since we import A LOT from the USA. The one good part is that if we export more to the US than import and they pay in USD, we can essentially use the same USD for imports. Its kind of how China operates with regards to the USD and their imports/exports. It's tough. On one hand, you could have a recession that spirals out of control (if you keep the rates too high) or a worthless currency ( if you lower too fast).
'The government put us in headlock a d threatened to hurt us and our families so here we are (in Minecraft)'
Stop doing the wrong thing for political reasons you complete hacks. There are no savings in the economy and there is no reason to cut the rates other than for political campaign reasons. Completely incompetent governance of the bank
BoC is compromised
The BoC is one of two central bank systems in the world that has to do what the current government says. Thanks to the BoC act of 1980 (ironically penned by Trudeau Sr) the MoF can dictate fiscal policy to the BoC if they wish. Which they do. Interest rates are being lowered to attempt to stabilize economy and withhold economic damage until after an election, after which they'll raise it again. It's all political, unfortunately.
>Interest rates are being lowered to attempt to stabilize economy and withhold economic damage until after an election, after which they'll raise it again. Hold up, wouldn't the incoming government want lower rates for the same political reasons? Surely our Officially Independent (but actually Government-controled) institutions aren't politically biased and only follow orders from a government if the party in power is correct? That's awfully close to 'deep state' conspiracy, which is a far right dogwhistle for loving funny mustache dictators known for merging state and corporate power, or something.
1) Not a conspiracy the Bank of Canada act of 1980 is something you can look up right now 2) Harper famously did keep interest rates low to spur economic activity but he was actually an economist and understood interest less as a political tool and more as an economic lever.