According to the Bank of Canada (BoC) minutes from a recent meeting released on Wednesday, the governing council saw a risk that consumer spending could be significantly weaker than expected in 2025 and 2026.
Key quotes
Spending in 2025 and 2026 could be affected by the number of households likely to renew their mortgages at higher rates.
Spending per person is expected to recover as rates decline, but many households will still face significant debt service costs.
They agreed to communicate that they would be weighing inflation forecasts in both directions.
They saw less chance that pent-up demand would lead to a sudden surge in home prices as rates were cut.
The Governing Council is increasingly confident that the “ingredients for price stability are in place”.
The downside risks to inflation are now as prominent as the upside risks.
Oversupplied economy, emerging slack in the labor market.
Moderate GDP growth, weak per capita consumption.
Core and headline inflation within the 1-3% range for several months.
Wage growth remains elevated at ~4%, but is expected to moderate.
Imbalances in the housing market persist, putting upward pressure on rents.
Future rate cuts are likely if inflation continues to decline as projected.
There is no predetermined path for the policy rate: decisions will be made on a meeting-by-meeting basis.
The BoC will continue to normalize the financial balance sheet by allowing maturing bonds to be settled.
Some expressed concerns that further weakness in the labor market could delay a rebound in consumption.
Market reaction to BoC minutes
At the time of writing, USD/CAD was down 0.04% on the day at 1.3753.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
