The Bank of Canada is set to announce its decision on interest rates this Wednesday, June 5th. While the odds of a rate cut have risen, some experts admit that the decision could still go either way1. Here are some key points to consider:
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Economic Growth: Bank of Canada Governor Tiff Macklem recently stated that the economy in Canada looks to be picking up. The bank expects solid GDP growth this year and further strengthening in 2025. However, if employee productivity doesn’t keep up with economic growth, inflation could become a concern2.
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Inflation and Monetary Policy: Macklem emphasized the importance of maintaining progress in bringing inflation down. The central bank aims to avoid leaving monetary policy restrictive for too long. Core inflation is expected to ease gradually, but external factors like global tensions or unexpected economic weakness could impact the situation2.
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U.S. Economic Resilience: The U.S. economy has surprised experts by maintaining growth despite aggressive rate hikes from the Federal Reserve. This has increased the probability of an “overheating” scenario, where rapid growth and higher inflation persist2.
Given these factors, the decision on a rate cut remains uncertain. Keep an eye on the Bank of Canada’s announcement for the final verdict2
