Spending in 2025 and 2026 could be hit by the number of households likely to be renewing their mortgages at higher ratesSpending per person is expected to recover as rates declined but many households will still face significant debt-servicing costsAgreed to communicate that they would be weighing two-way inflation forecastsSaw less of a chance that pent-up demand would lead to a sudden rise in house prices as rates were cutGoverning Council increasingly confident “ingredients for price stability are in place”Downside risks to inflation now as prominent as upside risksEconomy in excess supply, slack emerging in labor marketGDP growth subdued, consumption weak on per-capita basisCore and headline inflation within 1-3% range for several monthsWage growth still elevated at ~4%, but expected to moderateHousing market imbalances persist, putting upward pressure on rentsFuture rate cuts likely if inflation continues easing as projectedNo predetermined path for policy rate – decisions to be made meeting-by-meetingBOC to continue balance sheet normalization by allowing maturing bonds to roll offSome expressed concerns that further weakness in jobs market could delay rebound in consumption
The BOC has shifted to easing mode with two 25 bps cuts, but remains cautious. Markets should watch for signs of persistent services inflation or weaker-than-expected consumption to gauge whether 50 bps will be on the table in September.
This article was written by Adam Button at www.forexlive.com.
