Bank of Canada 'too slow to cut rates,' says David Rosenberg

Canada is grappling with economic challenges amidst a backdrop of rising interest rates, with one notable economist asserting that the Bank of Canada has been sluggish in its response to the situation.

David Rosenberg, founder and president of Rosenberg Research, expressed concerns in an interview on Monday, highlighting that Canada's economy is displaying signs of weakness beyond what headline figures may indicate. He pointed out that conditions in the labor market are beginning to deteriorate, despite reports of a 41,000 job increase in February. Rosenberg emphasized that when factoring in population growth, this job uptick loses its significance. 

"The most crucial statistic is the employment-to-population ratio, which has declined for five consecutive months," Rosenberg remarked. He warned that the labor market is exhibiting increased slack, which is likely to lead to a slowdown in wage growth. He suggested that a rate cut may be on the horizon in the coming months, anticipating that the Bank of Canada might make such a move in the spring.

Ed Devlin, founder of Devlin Capital and senior fellow at the C.D. Howe Institute, echoed Rosenberg's sentiments, stating in an interview on Monday that the Bank of Canada risks "overtightening" by delaying interest rate reductions. Devlin suggested that the central bank should have swiftly lowered rates but instead appears focused on maintaining its credibility in fighting inflation.

Rosenberg further underscored the fundamental weakness of the Canadian economy, asserting that it might already be in a recession. He pointed to indicators such as GDP per capita and real income per capita as evidence supporting this view.

"In both directions, the bank's actions have been untimely," Rosenberg remarked. "They were too slow to raise rates and now too slow to cut them."

These assertions from prominent economists reflect growing concerns about the state of Canada's economy and the efficacy of the Bank of Canada's monetary policy decisions. As economic conditions continue to evolve, attention will remain focused on how policymakers respond to mitigate the risks and support sustainable growth.