Is there any chance of a BoC rate pause or did jobs data seal the deal?

Economists give their verdicts on what the latest labour statistics mean for this week's interest rate decision

Is there any chance of a BoC rate pause or did jobs data seal the deal?

The Bank of Canada (BoC) makes its latest interest rate decision this Wednesday – after increasing to 4.75% in June -  but has the labour market data released at the end of last week made it a certainty?

Official figures from Statistics Canada show that there were 60,000 jobs added to the economy in June, mostly driven by 110,000 full-time jobs, a strong gain from a little-changed full-time count in May.

However, despite the gain, especially for core-working-age men, unemployment was up 0.2 percentage points to 5.4%.

Overall, this was a strong reading of the labour market, and one that could mean the BoC has little hesitation in making another hike in interest rates this week.

What the economists say

Among major economists, the general tone is expectation that Governor Macklem will be announcing another rise of 25 basis points, given the jobs gains having an inflationary impact with annual wage gains of 4.2% in June, albeit a slower pace than recent months.

RBC Economics’ assistant chief economist Nathen Janzen believes that, even though there are some signs of a softening economy, this will have been expected when the BoC resumed rate hikes last month, and he says it’s unlikely the bank planned only one increase.

“The June labour market data was mixed but shouldn't be enough to prevent the Bank of Canada from following through with a second straight 25 basis point interest rate hike at the next policy decision next week,” he wrote in a commentary.

CIBC’s Andrew Grantham’s assessment is that “we now forecast a 25bp hike next week, rather than at the September meeting” but he thinks it will be the last increase for now: “…we still suspect that 5.0% will be the peak for the Bank of Canada’s overnight rate.”

Marc Desormeaux, principal economist at Desjardins is less convinced that this will be a ‘one and done’ scenario, writing: “The strong jobs print virtually assures another 25bp hike at the Bank’s next meeting later this month and keeps the door open for more increases going forward.”

Scotiabank’s Derek Holt agrees that a hike is coming this week and that there will be a “hawkish bias” to the BoC’s tone.

Meanwhile, TD Economics’ senior economist Leslie Preston thinks there is still a chance that the central bank will wait until the fall for its next move, although slim.

“We expect the only modest cooling in inflation in wages will tip the Bank in favour of another 25 basis point hike,” he wrote. “However, if they opt to skip a meeting, their tone is likely to remain hawkish, and a September hike would remain on the table.”