Bank of Canada deploying forecast 'fiction,' scotiabank economist says

The Bank of Canada is using its economic forecasts to try to prevent medium-term rates from falling too much and stoking more housing market speculation, according to a top economist.

Derek Holt, head of capital markets economics at Bank of Nova Scotia, described Governor Tiff Macklem’s tactics as “stealth forward guidance” after the central bank raised its benchmark rate to a 22-year high of 5 per cent on Wednesday. 

The decision was accompanied by a new set of economic projections that see the economy headed for a soft landing, with growth averaging about 1 per cent over the next 12 months. Output is then expected to pick up again, to 2.5 per cent in 2025, while inflation eases over the next two years until it’s back at the bank’s 2 per cent target.  

To Holt, that forecast “deserves a place on the fiction shelves at your favorite bookstore or the virtual equivalent.”