Bank of Canada May Slow Rate Cuts Amid Stimulus from Tax Rebates: TD Bank
A recent TD Economics report indicated that millions of Canadians would receive federal and provincial tax rebate checks this spring. This flow of money could have the Bank of Canada looking to cut rates over the next year.
A report published on Wednesday suggests that the central bank’s cycle of rate cuts is expected to persist, albeit at a more gradual rate, as a result of the economic uplift provided by the rebates.
James Orlando, director of economics at TD Bank, stated that the Bank of Canada has been reducing interest rates in an effort to invigorate a sluggish economy. Government stimulus is expected to provide a stronger economic cushion, potentially reducing the necessity for rate cuts.
They’re saying that about as many as half of Canadian households will be using the rebate funds to save or pay off debt, while the other half will purport to spend them—in this case, contributing to activity. TD has switched to its new forecast and is now going to factor in one less cut than what was earlier projected.
According to analysts, the central bank will lower interest rates by 25 basis points this December and another similar reduction in January as these stimuli continue to decline. The rate at which the Bank of Canada may implement the cut will also possibly be less, as there will be a more careful observation of the economy’s reaction before implementing the cuts. TD has revised this forecast, claiming that the policy rate would reach 2.50% at the end of 2025.
Our readers think it is possible for the central bank to cut interest by 25 basis points this December and a similar amount in January. With the cuts in interest rates continuing, the Bank of Canada would take a more cautious, less frequent rate cut to assess the economic reaction towards it. With this, TD has updated its forecast, saying that the policy rate would end up at 2.50% in 2025.
James Orlando emphasized the impact of external uncertainties, including potential U.S. tariffs, which may hinder Canada’s economic growth. The current emphasis is on the ways in which Canadians are leveraging the rebates and the subsequent impact on the overall economy.
The evolving dynamic highlights the relationship between fiscal stimulus and monetary policy as Canada charts its course toward economic recovery.
- Published By Team Nation Press News
