The key rate could fall again in July, despite the increase in inflation and the unemployment rate in the country in May, says an economist.
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“It’s certainly still possible,” says Clément Gignac, senator and economist, in an interview with LCN.
The expert recommends that citizens opt for a variable rate for their mortgage, if they can “afford it.”
He thinks there will be a “much greater chance” that interest rates will fall over the next year, if the trend continues.
The influence of the unemployment rate
In May, Canada recorded an unemployment rate of 6.2%, which represents an increase of 1% over a year. In Quebec, this percentage increases to 9.5% among young people, he says. This worrying trend is also found in Ontario, where the rate stands at 15% among young adults, according to him. It was around 11% in May 2023.
“Clearly, we have indications that things are slowing down in the job market,” he says.
The expert pointed out that the Governor of the Bank of Canada, Tiff Macklem, spoke on this subject, reporting on Monday that workers are demanding less than before for better wages, due to the lack of jobs. There would therefore be “less tension on the labor market” on this subject, notes Mr. Gignac.
This phenomenon could therefore influence the key rate, according to him.
“We have excess capacity, so it’s not just inflation. Now, employment figures will matter in the Bank of Canada’s decision to cut [ou non] rates [directeurs]” explains the economist.
The increase in unemployment comes with that of inflation, which increased slightly to 2.9% in May 2024 compared to the increase of 2.7% recorded a month earlier. The price of food, rent, cell phone plans and travel notably played a role in this increase.
Watch the full interview in the video above.
