Will interest rates come down? The Bank of Canada is about to decide

The Bank of Canada is widely anticipated to cut interest rates on Wednesday after weak reports on unemployment and economic growth, as well as signs of cooling inflation.

The Bank of Canada is set to decide whether to cut, hold or increase interest rates on Wednesday  — and a growing number of economists say they are anticipating a cut.

“We think that the Bank of Canada should and will cut interest rates again next week,” said Andrew Grantham, executive director and senior economist at CIBC.

“Recent data hasn’t been particularly threatening from an inflation point of view, and so we think that the Bank of Canada has room to respond to the signs of a slowing in the economy.”

The Bank of Canada’s upcoming decision comes after several rounds of economic data released over the summer that suggest the economy and labour market are weakening.

That includes the third straight drop in gross domestic product in June, and recent consumer price index reports that show inflation appears to be stabilizing within the central bank’s one to three per cent target range, which aims to keep inflation increases low and stable.

“We believe they’re (the Bank of Canada is) going to cut rates Wednesday, and we could see a couple of more cuts this year if the data does not pan out the way the bank was expecting,” principal economist Andrew DiCapua at the Canadian Chamber of Commerce said.

The Labour Market Survey for August also showed that unemployment rose to more than seven per cent, which economists say will likely factor into the Bank of Canada’s assessments. This was as the trade war led many business owners to reduce their workforce or freeze hiring due to higher costs from tariffs.

“The Bank of Canada was expecting a (GDP) contraction in Q2 — that was no surprise to them. I think what is more surprising is that the unemployment rate has continued to increase as we’ve gone into Q3,” Grantham said.