A seasoned economist from Bay Street has sounded the alarm, asserting that Canada's economic engine has slowed considerably, warranting immediate action from the Bank of Canada. David Rosenberg, the founder and president of Rosenberg Research, highlighted the stark contrast between Canada and the U.S., where economic growth is robust. In a recent interview with BNN Bloomberg, Rosenberg expressed his concerns, stating, "I think that the Canadian economy is pretty well flat on its back."
Rosenberg emphasized the urgency for the Bank of Canada to step in with a rate cut, especially as the economy is transitioning from a state of excess demand to one of excess supply. Despite acknowledging this shift, the central bank has yet to commit to lowering rates, prompting Rosenberg to question, "What are they waiting for?"
The latest economic indicators paint a gloomy picture, with Statistics Canada reporting a trade deficit surpassing $2 billion in March, far exceeding analyst expectations of a surplus. Moreover, recent GDP data suggests that Canada's economic growth has been stagnant in recent months.
These developments have fueled speculations that the Bank of Canada might lower its key interest rate at the next policy decision in June. However, there are concerns about the bank's cautious approach, especially considering the economic situation in the U.S., where rate-cut expectations have been pushed back due to inflation worries.
Rosenberg dismissed these concerns, arguing that Canada's inflation measurement differs significantly from that of the U.S. He suggested that Canada's inflation levels are already close to the Bank of Canada's target when volatile components are stripped out of the Consumer Price Index.
Rosenberg warned that delaying rate cuts could exacerbate the situation, leading to more significant downward pressure on the Canadian dollar. He cautioned that the longer the Bank of Canada waits, the more aggressive rate cuts will be needed in the future to address the mounting economic challenges.
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