The Bank of Canada is expected to raise interest rates again this week as forecasters say the economy has not softened enough for the central bank to back off.
The interest rate announcement is scheduled for Wednesday, just over one month after the central bank hiked its key rate by a quarter of a percentage point, bringing it to 4.75 per cent.
"I do think that we are seeing things shift. Are they shifting fast enough for the Bank of Canada? Perhaps not," Desjardins said. Economists reacting to the latest jobs report for June said the details paint a mixed picture. The economy added 60,000 jobs last month, suggesting employers' hiring appetite persists. Meanwhile, the unemployment rate climbed higher to 5.4 per cent as more people looked for work and the country's population continued to grow.
But with the unemployment rate still below pre-pandemic levels, Desjardins' senior director of Canadian economics suggests the labour market is still tight. Economists were widely anticipating a recession to hit as early as late 2022. Instead, the economy has continued to expand, despite interest rates being at their highest levels in decades."I think the bank is really laying the groundwork to sustainably start bringing inflation back towards two per cent," he said.
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