Nathan Janzen, RBC Economics
“Employment is still rising, but so is the unemployment rate with job demand no longer strong enough to keep up with a rising supply of workers from surging population growth. The Bank of Canada will continue to watch wage growth closely and is clearly willing to re-start rate hikes again if inflation doesn’t slow and broader economic conditions don’t soften further.
“While little progress was made in August to create some slack in the labour market and that growth may be stronger, we do not believe it will change the BoC’s view of the economy meaningfully nor will it push the central bank to hike. The BoC has made it clear that the path for monetary policy depends on the outlook for inflation and whether we see some easing momentum in core measures of inflation.
“We believe that the BoC will leave its policy rate unchanged for the rest of the year, as some time is needed for higher interest rates to fully impact the economy. As we have shown, monetary policy entered restrictive territory in late 2022 or early 2023, depending on the measure. Historical patterns suggest that a downturn usually follows five to seven quarters later, suggesting very weak growth late this year and early next year.
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