MNI INTERVIEW: BOC Has Room To Keep Cutting By 50BPS: Senator
MNI (OTTAWA) - Canada's central bank has scope to cut another half-point in December and potentially beyond with inflation under control and in order to keep the economy on track for a soft landing, Senate Banking Committee member and former union leader Hassan Yussuff told MNI.
“The Bank has got lots of room to ensure signaling that they are going to continue to cut rates in a significant way to get back down to a level that will help Canadians with some the things that they are dealing with, whether that’s mortgages or other purchases,” he said in an interview Tuesday.
“They should keep on the pace of 50" basis point cuts, he said.
The Bank's concerns earlier this year about elevated wage gains should be fading with union wage settlements cooling off, youth unemployment remaining elevated, and the prospect of companies needing to pay higher wages as the government curbs immigration, Yussuff said.
STICKING THE LANDING
“The Bank needs to signal we are in a soft landing and it needs to ensure we can boost employment,” he said. The jobless rate has climbed about a percentage point to 6.5% over the last year. (MNI INTERVIEW: BOC Justified To Cut 50BPS More In Dec-Kronick)
Another half-point move in December would also boost holiday shopping and provide some relief for the more than 1 million households refinancing mortgages at much higher rates next year. “Before the holidays it’s actually quite timely for retail but also I think overall for the economy to ensure we don’t fall into a recession,” Yussuff said.
Yussuff last week asked some of the more pointed questions of Governor Tiff Macklem during a committee hearing about the need for more stimulus. The Senator believes Macklem understands the strain from tight policy, especially on younger families.
The Bank of Canada raised rates from near zero to the highest since 2001 at 5% before leading the G7 with three quarter-point cuts starting in June and the move to a 50bp reduction on Oct. 23. Canada's 3.75% policy rate is still tight relative to staff estimates of neutral at 2.75% and inflation that's slipped to 1.6%.
The Bank deserves credit for setting up a soft landing but the work isn't done, Yussuff said.
“We’re pleased that inflation is below the Bank target, there has been a lot of pain and sacrifice to get inflation down. There’s a need to say to the Bank they need to move farther reducing rates," he said.