In a client note, economist Charles St-Arnaud wrote that the BoC’s growth forecast needs better results from non-energy exports and without that growth the current 40 per cent expectation for an interest rate cut could rise.
While a rate cut may benefit businesses that are under pressure from cheaper labour and materials costs in Asia and Mexico, it would also raise a familiar concern: “The BoC should be worried if it reignites household borrowing and the housing market, while business investment is currently not very sensitive to rate cuts,” St-Arnaud wrote.
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Canada could cut interest rates again this year if exports continue to disappoint according to investment bank Nomura.