“I would say if (the Bank of Canada) didn’t cut next week, it would signal a much greater willingness to tip the economy into recession, just for the sake of getting inflation down a few tenths of a percentage point more.”
The latest Statistics Canada report on retail sales Friday showed Canadians reined in their spending in May as retail sales dropped 0.8% to $66.1 billion.
Sales were lower in eight of the nine subsectors tracked, the agency said.
“What the Bank of Canada is trying to do is just reduce the amount of restraint it is placing on the economy. It’s not trying to stimulate the economy, it’s just trying to reduce the amount of headwinds it’s providing,” Mendes said, adding a second rate cut could make Canadian consumers begin to feel more confident about spending again.
Why Canada’s employment numbers matter
The most recent data on the Canadian job market shows the economy stalling in June, losing 1,400 jobs while the unemployment rate rose to 6.4%, from 6.2% in May.
The June result was the highest reading for the unemployment rate since January 2022, another indication that raises the odds of the Bank of Canada lowering rates this week.
But while most market watchers believe an interest rate cut will come this week and be followed by additional cuts later in the year, that view is not unanimous.
Clay Jarvis, mortgage and real estate expert for NerdWallet Canada, said this week’s decision could go either way.
