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What economists expect from the next Bank of Canada rate decision

As the Bank of Canada gears up to announce its next rate decision on January 24, economists are anticipating that the trend-setting interest rate will remain stable at five percent. This expectation comes despite an unexpected rise in inflation in December 2023, with the Consumer Price Index climbing to 3.4 percent, as reported by Statistics Canada.

Economists, as tracked by Bloomberg, are projecting a fourth consecutive hold on interest rates by the central bank since the policy rate reached five percent in July 2023. Benjamin Tal, Deputy Chief Economist at CIBC Capital Markets, emphasizes that while the rates are expected to stay put, the crucial aspect to watch is the sentiment conveyed by the Bank of Canada. In an interview with BNN Bloomberg, Tal stated that the market will closely analyze the central bank's language, asserting that "the narrative will determine the data and not vice versa."

Tal believes the Canadian economy is in "recessionary territory" and anticipates the Bank of Canada will be cautious when deciding on interest rates. Contrary to some optimistic expectations, he suggests the Bank is "done" with raising rates and speculates on the timing of a potential cut, hinting at a more realistic timeline around June or July.

James Orlando, Senior Economist at TD, echoes this sentiment, suggesting that the Bank of Canada is likely to emphasize "clear progress on the overall economy" in its upcoming communication. Orlando acknowledges positive economic surges but emphasizes the underlying weakness, stating that the Bank might adopt a cautious approach, indicating that the job is not yet done.

RBC Economics, in a recent report, highlights that the Bank of Canada's rate decision will be closely scrutinized for hints on the duration of the interest rate hold. They predict the central bank will resist the possibility of rate cuts in the near future, indicating a stance aimed at maintaining stability.

The persistent above-target core inflation, averaging 3.65 percent, is deemed "unsettling news" by Doug Porter, Chief Economist at BMO Capital Markets. Porter expects the Bank of Canada to maintain a cautious stance, given this inflationary trend.

Looking beyond the economic indicators, James Laird, Co-CEO of, emphasizes the potential impact on the housing market. With expectations of a rate hold, he underscores the significance of the Bank's language, especially for those with variable-rate mortgages or home equity lines of credit (HELOC). Any mention of a rate hike could weigh on real estate activity in 2024.

In conclusion, while economists anticipate a steady interest rate from the Bank of Canada, the focus will be on the central bank's sentiment and narrative, with a cautious approach likely to prevail in light of persistent inflation concerns and a nuanced economic landscape. The language used in the announcement will be closely examined for insights into the Bank's future monetary policy decisions.



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