After cutting at its last two policy meetings, the Bank of Canada is likely to cut at least two more times this year — and possibly three, according to Paul Beaudry, a former deputy governor at the central bank.
In an interview with BNN Bloomberg on Thursday, Beaudry said Tiff Macklem and the central bank sounded quite dovish in the latest monetary policy press conference and noted interest rates “will go down to four per cent or maybe even below” by the end of the year. That’s down from the current level of 4.5 after Wednesday’s cut.
Beaudry said the path ahead still depends on a set of factors that need to continue to improve, especially core inflation measures and service price inflation.
Though he expects cuts, he says a pause is possible if progress on inflation stalls. Beaudry said the headline consumer price index (CPI) will likely continue to edge lower over the next few months, but if events in the U.S. unfold as expected, that should open the door for more cuts in Canada, too. “The U.S. is growing at a reasonable rate and (the U.S. central bank) will be coming into the rate-cutting cycle very soon.”
Unemployment inching higher
Beaudry said new migrants of a younger generation are most hurt by unemployment levels right now, “but higher growth going forward will help that group if things go to plan with the continuous movement towards the two percent (inflation) target which will allow rates to be cut.”
In an interview on Wednesday, veteran market commentator David Rosenberg said he expects Canada’s unemployment rate to reach as high as eight per cent in the coming years, but Beaudry doesn’t think that is a likely scenario.
With “growth picking back up, unemployment will stick around where it is now,” he said.
