The Big Story What's going to happen with interest rates next week?
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Jan 26, 2025 Royce Mendes, Managing Director and Head of MacroStrategy at Desjardins Capital Markets, shares his insights on interest rates amid economic uncertainty. He discusses the potential for the Bank of Canada to adjust rates and how rising rates affect households. The conversation dives into the interplay between tariffs, inflation, and monetary policy, emphasizing the necessity of fiscal stimulus. Mendes also highlights the challenges of maintaining economic stability as central banks navigate the impacts of global events.
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Bank of Canada's Challenge
- The Bank of Canada faces uncertainty due to potential tariffs and a weakening economy.
- They may lower interest rates to support the economy if tariffs are implemented.
Focus on Domestic Factors
- The Bank of Canada should consider lowering interest rates due to domestic factors like mortgage renewals and slowing population growth.
- These factors justify easing monetary policy regardless of tariffs.
Tariffs and Inflation
- Tariffs might cause a one-time price increase but not sustained inflation.
- Central banks focus on underlying inflation and the unemployment rate.