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July rate cut 'more likely' than June: TD's chief economist

TD Bank's chief economist predicts that the Bank of Canada is leaning towards a rate cut in July rather than June, deviating from the expectations of many other economists. Beata Caranci, in an interview with BNN Bloomberg, highlighted the importance of allowing more time to assess inflation trends before making a move.

Caranci emphasized the significance of recent shifts in the economic landscape, particularly in the United States, where initial optimism about decreasing inflation has waned. She suggested that the Bank of Canada is likely to adopt a cautious approach, wary of acting prematurely and risking potential backlash if inflation persists unexpectedly.

The decision-making process for the Bank of Canada is further complicated by recent economic indicators. Statistics Canada's preliminary GDP data revealed stagnation in March and minimal growth in February, fueling speculation about the necessity of a rate cut to stimulate the economy and avert a potential recession.

However, Caranci stressed the importance of aligning any rate cuts with the actions of the U.S. Federal Reserve to prevent significant currency fluctuations. A substantial deviation from the Fed's timeline could exert downward pressure on the Canadian dollar, affecting imported inflation and investor confidence.

While acknowledging the potential benefits of a weakened currency for exports, Caranci cautioned against moving too hastily, emphasizing the need for a balanced approach. She highlighted the delicate balance the Bank of Canada must strike between stimulating economic growth and managing currency dynamics to maintain stability and credibility.

Ultimately, Caranci's insights underscore the complexity of the decision-making process facing the Bank of Canada, with considerations ranging from domestic economic indicators to international currency dynamics. As the central bank navigates these challenges, it must carefully weigh the potential benefits and risks of any policy adjustments to support sustainable economic recovery.



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