• Tue. May 28th, 2024

National Bank CEO predicts Bank of Canada may need to lower interest rates before Federal Reserve


Mar 26, 2024

The Chief Executive of the National Bank of Canada, Laurent Ferreira, expressed concerns about the country’s lagging economy and the potential need for the Bank of Canada to cut interest rates before its American counterpart. He pointed out that the U.S. economy is growing at close to two per cent while Canadian growth is stagnating, which could lead to the central banks of the two countries being on different timelines for lowering interest rates.

Ferreira made these comments at a financial services conference in Montreal hosted by the National Bank of Canada. He highlighted the differences in the strength of the labor markets between the U.S. and Canada, as well as the sensitivity of Canadian consumers to interest rate increases due to the nature of the mortgage market. He also mentioned that high levels of immigration in Canada present a challenge for monetary policy.

The CEO specifically noted that housing and immigration pose a major conundrum for the Bank of Canada, as these factors are not always accurately modeled in economic forecasts. He emphasized that inflation in Canada is tied to mortgage renewals and rents, making the outlook uncertain.

While the U.S. Federal Reserve recently signaled three interest rate cuts for the year, it is widely expected that the Bank of Canada will begin cutting rates in June. This potential divergence in interest rate policies between the two countries could have significant implications for currency values and other economic factors.

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By editor

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