Forty economists participated in a Reuters poll this week and determined that it is most likely the Bank of Canada interest rates will remain unchanged until the end of 2020 at the soonest and that there is a 40% chance we will see them make a cut to the interest rates. Reasons for prognosis include poor economic growth and ongoing world trade tensions. (Come on US-China. Figure it out.)
The Bank of Canada’s expectation of an economic rebound sometime in the second half of 2019 doesn’t mesh with the polled results. In fact, a lot of people don’t align with the Bank’s expectations. One poll participant, Morgan Stanley, stated, “We see little impetus for policymakers to resume rate hikes over our forecast horizon, as sluggish growth and lingering slack in the economy will continue to warrant leaving some policy accommodation in place.”
An ever slowing economy is grounds for interest rate cuts by the Bank of Canada. Stanley went on to say, “If growth fails to show any convincing signs of a rebound in 2019, we think the risks of rate cuts will increase, and given our sluggish outlook, we place a subjective 40 per cent probability that the BoC will deliver at least one 25 basis point rate cut over the next 12 months.”
Canada has also been keeping a wary eye on the US-China trade agreement. As our largest trade partner, anything the US does will directly impact us. Another recent Reuters poll showed that the US is increasingly likely to enter a recession. And a Reuters poll from last month showed that Canada is 20% likely to enter its own recession in the next 12 months, a likelihood that jumps 27.5% in the next 24 months.
According to yet another Reuters poll executed this month, we can expect to see 2019 housing prices to remain the same and for prices in 2020 to increase by 1.7%.