Fed pivots to job losses When will the Bank Of Canada lower interest rates? This has been on people's mind but I'll give an attempt on what I think they will do. If one recalls last year at this time when the bank policy rate paused prior to the spring housing rally. Tiff Macklem had no choice but to raise an additional 50 basis points to tame inflation which was still running out. Now, do you really think Tiff Macklem will lower rates before spring time to have another repeat of what happened last year? I don't think so because he would be making the same policy error he made last year. Moreover, inflation is still running high in this country and I don't think they've been telling the truth either but I digress.
According to the Bank of Canada, Cpi trim or Cpi median is still running at 3.7% and 3.6% respectively. These are measures that the Bank of Canada are focusing on because it gives a better measurement of where inflation is in this country. The headline number that's reporting in the media is highly volatile month over month and not insightful. Canada still has a long way to go to bring inflation back to target and a recession will bring it down and force the BoC to cut rates.
I believe Tiff is going to remain in restrictive mode until something major breaks which will force him to pivot. The recession will be more apparent as they become reactive to job losses rather than worry about inflation. If rate cuts happen prior to the spring it will be validation that something major has broken in the system. To use a similar analogy, when a person develops a high fever, they eventually get better and rebound just as I believe recessions are a natural part of the business cycle. It weeds out all the malinvestments that took place during covid just as a virus weeds out the vulnerable and sick. When a tree falls down, a new one replaces it and life moves on just as the business cycle does.
Canada will eventually rebound and prosper as they did many times before.