Bay Street won’t be fooled again.
The professional watchers of the Bank of Canada were badly embarrassed by Governor Stephen Poloz’s decision to take out recession “insurance” in January.
Now, some may be getting ahead of the central bank governor, who will unveil his latest policy decision this morning. Many analysts foresee a quarter-point reduction in the benchmark rate to help escape a possible recession.
The shift occurred over the past few weeks. The data through the first half of the year was uninspiring. A weaker currency and cheaper energy have done little to lift growth, sparking talk of a mild recession. About half the economists surveyed by Bloomberg News now say the Bank of Canada will drop its benchmark interest rate a quarter point to 0.5% today.
The case for a cut would be clearer if Poloz hadn’t already done so in January. That decision took some courage as the data didn’t necessarily support it. The governor can take solace in the fact that his economists were among the first to foresee that Canada’s economy was headed for trouble in the first half of 2015.
Do current conditions demand similar boldness? The answer isn’t as clear as the shift in the Bay Street consensus suggests.