The Bank of Canada ended the year with another interest rate hold as the economy slows and forecasters speculate on the timing of rate cuts in 2024.
The central bank announced its decision to keep its key interest rate steady at five per cent Wednesday, encouraged by evidence that higher rates are helping bring inflation down.
“Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year,” the central bank said in a statement detailing its final decision of the year.
The combination of weaker growth and a cooling job market suggests demand is no longer outpacing supply in the economy, the central bank added.
This slowdown, the Bank of Canada has argued, is necessary to restore price stability.
The decision Wednesday carried few surprises as it marked the third consecutive time the Bank of Canada has opted to keep its key rate unchanged.
But as financial markets place their bets on when the central bank may start cutting rates — and Canadians eagerly await that turning point — the central bank is giving no hints on when that may happen.
Instead, it’s still keeping the door to more rate hikes ajar.
“Governing council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed,” the central bank said, noting it wants to see underlying price pressures ease further.
But economists and market watchers don’t buy that more rate hikes are really on the table.
“They’re still trying to talk tough. They’re trying to tell people that it’s not a slam dunk that …they’re going to be cutting interest rates,” said BMO chief economist Douglas Porter. “But very few people are listening to them anymore.”
The central bank will have to switch to cutting interest rates soon enough, TD director of economics James Orlando said, as the unemployment rate continues to rise and spending in the economy takes a hit. But for now, it makes sense for the central bank to keep its guard up.
“A hold today was the only option for the BoC,” wrote Orlando in a note to clients. “But with inflation still above three per cent, we get why the BoC isn’t ready to declare victory.”
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Inflation has eased considerably over the last year, reaching 3.1 per cent in October. But economists are mindful that inflation has been somewhat volatile lately, and more evidence is needed that underlying price pressures are easing.
While financial markets are predicting rate cuts to start as early as the first quarter of next year, some commercial banks are taking a more cautious approach.
RBC, for example, expects the Bank of Canada to start cutting interest rates in the second half of next year.
“Our view is that they’re only going to start sort of cutting in this second half of 2024, once (it) become more obvious that inflation is truly going to return back to target and stay there,” said economist Claire Fan.
The Bank of Canada’s next rate decision, along with its updated economic forecasts, is set for Jan. 24.
A key factor that will drive the central bank’s decision on when to cut interest rates will be how the economy slows in the coming months.
Weighed down by higher borrowing costs, the Canadian economy has struggled to consistently grow this year. The most recent GDP report showed the economy contracted by 1.1 per cent on an annualized basis in the third quarter.
The labour market has also lost much of its steam as the unemployment rate creeps higher, reaching 5.8 per cent.
These trends are expected to continue.
Porter says the Canadian economy has not yet fully absorbed the Bank of Canada’s hefty rate hikes, suggesting a sluggish year is ahead.
“The economy is still trying to digest those rate hikes that we’ve had in the last two years,” Porter said.
“Our official view is for GDP to rise 0.5 per cent next year, which is extremely slow. It maybe doesn’t quite rise to the level of the definition of recession, but it’s going to feel pretty sluggish.”
This report by The Canadian Press was first published Dec. 6, 2023.
EDMONTON – RCMP say a second suspect has been arrested in the killing of an Alberta county worker.
Mounties say 28-year-old Elijah Strawberry was taken into custody Friday at a house on O’Chiese First Nation.
Colin Hough, a worker with Rocky View County, was shot and killed while on the job on a rural road east of Calgary on Aug. 6.
Another man who worked for Fortis Alberta was shot and wounded, and RCMP said the suspects fled in a Rocky View County work truck.
Police later arrested Arthur Wayne Penner, 35, and charged him with first-degree murder and attempted murder, and a warrant was issued for Strawberry’s arrest.
RCMP also said there was a $10,000 reward for information leading to the arrest of Strawberry, describing him as armed and dangerous.
Chief Supt. Roberta McKale, told a news conference in Edmonton that officers had received tips and information over the last few weeks.
“I don’t know of many members that when were stopped, fuelling up our vehicles, we weren’t keeping an eye out, looking for him,” she said.
But officers had been investigating other cases when they found Strawberry.
“Our investigators were in O’Chiese First Nation at a residence on another matter and the major crimes unit was there working another file and ended up locating him hiding in the residence,” McKale said.
While an investigation is still underway, RCMP say they’re confident both suspects in the case are in police custody.
This report by The Canadian Press was first published Sept. 13, 2024.
RICHMOND, B.C. – The Integrated Homicide Investigation Team says the 26-year-old son of a man found dead on British Columbia’s Sunshine Coast has been charged with his murder.
Police say 58-year-old Henry Doyle was found badly injured on a forest service road in Egmont last September and died of his injuries.
The homicide team took over when the BC Coroners Service said the man’s death was suspicious.
It says in a statement that the BC Prosecution Service has approved one count of first-degree murder against the man’s son, Jackson Doyle.
Police say the accused will remain in custody until at least his next court appearance.
The homicide team says investigators remained committed to solving the case with the help of the community of Egmont, the RCMP on the Sunshine Coast and in Richmond, and the Vancouver Police Department.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, have broken off without an agreement following 15 hours of talks.
Joe McCann, president of Amalgamated Transit Union Local 1724, says they stayed at the bargaining table with help from a mediator until 2 a.m. Friday and made “some progress.”
However, he says the union negotiators didn’t get an offer that they could recommend to the membership.
McCann says that in some ways they are close to an agreement, but in other areas they are “miles apart.”
About 600 employees of the door-to-door transit service for people who can’t navigate the conventional transit system have been on strike since last week, pausing service for all but essential medical trips.
McCann asks HandyDART users to be “patient,” since they are trying to get not only a fair contract for workers but also a better service for customers.
He says it’s unclear when the talks will resume, but he hopes next week at the latest.
The employer, Transdev, didn’t reply to an interview request before publication.
This report by The Canadian Press was first published Sept. 13, 2024.
