Author archives

Two in a row with more to go was the message from the Bank of Canada today, as economic slack, or “excess supply”, has the economy no longer in need of such punitive interest rates to contain inflation. Today’s quarter point cut to 4.50% came as no surprise, and the June/July moves were consistent with our forecast for 2024’s easing pace.

This In Focus report looks at how far the Bank of Canada and the Fed can diverge. We find that the Bank of Canada could manage a 100bps divergence in the current context with only modest inflationary consequences.

This In Focus report examines some of the trends emerging from this year’s provincial budgets, and reasons behind the increase in borrowing that is expected this year.

Avery Shenfeld, CIBC’s Chief Economist joins Andrew Grantham, Executive Director & Senior Economist, to discuss Canadian inflation, central bank policy and the Canadian dollar.

We’re not going to pretend to know where the random number generator that is next week’s Canadian Labour Force Survey will land. It makes sense to us that any rebound in employment will fall short of labour force growth, seeing the unemployment rate edge up again...

What started out as an advantage for the Canadian economy spiraled out of control as 2023 progressed. Population growth led by non-permanent residents initially helped to fill elevated job vacancies coming out of the pandemic, but the surge since mid-2022 has also resulted in housing shortages and rent price inflation.

Facts can change, particularly when they rely on volatile economic data. At the moment, though, GDP growth appears to be running stronger than the Bank of Canada had assumed a month ago, creating a slight headache for policymakers.

Ian is joined by Andrew Grantham this week, and the show begins by discussing why the Canadian economy appears to be growing much faster in Q4 compared to BoC expectations. The impact of previous supply-side restrictions, like the tragic wildfires in 2023 and the port strikes, are starting to filter through the data. This means Canada is seeing low-hanging fruit on the supply side of the economy, which should not have a big impact on inflation. The duo also discuss recent labour market trends in North America, and why conditions look to be less strong under-the-hood. Ian gives an update on CORRA and the eventual QT cessation announcement, focusing on the recent announcement that the Bank will discuss balance sheet normalization at an upcoming speech. The pair tie everything together and discuss the policy path priced by the market, and why it feels too ‘light’ given all the risks in the economy.

Andrew Grantham, Senior Economist at CIBC Capital Markets talks with the Hon. Lisa Raitt about his recent research paper which uses provincial data to assess the economic impact of immigration. Learn more about the research paper referenced in the episode: https://economics.cibccm.com/cds?ID=406c97a6-1b1c-4a06-b4ba-4b55f08e69b5&TYPE=E

Ian is joined by Andrew Grantham, and the duo begin the episode discussing the FOMC rate decision. Andrew lays out the logic behind his forecast for a July and September hike, while Ian walks through the implications for the Bank of Canada. Ian introduces his new bond forecasts and talks about why current market pricing for the Bank and the Fed looks so strange compared to prior cycles. Andrew talks about his economic outlook for 2024 and highlights the upcoming weighting changes for CPI next week.

Andrew Grantham, Senior Economist, CIBC, joins the Hon. Lisa Raitt to discuss the growth potential of the economy, specifically labour and productivity and to share highlights from his new report ‘More Room at the Inn? Rethinking Canada’s medium-term upside.’

Ian and Andrew discuss their expectations for the Bank of Canada interest rate decision next week. The duo walk through the reasons why the Bank will need to hike by another 75.0bps next week, and look at the most likely path of short-rates over the rest of the year. Ian talks about his favorite trades going into the release, noting that the forward expectations for BoC policy are too flat. Andrew spends some time detailing his expectation of forecast changes in the MPR, while the pair spend time talking about the impact that a weaker Canadian dollar has on both CPI and the stance of policy.

Ian and Andrew discuss the latest Canadian GDP numbers, noting how the deceleration in growth is coming from all the ‘wrong’ places when it comes to slowing inflation. Ian talks about how slowing growth impacts the yield curve, noting the differences between slowing from an above potential to a below potential rate. Andrew shares his view on the Bank of Canada rate decision next week, and provides the reasons why he thinks this is the final hike of the current cycle. The duo discuss what ‘higher for longer’ means, and the implications to how low policy rates can be cut in the next recession and why longer-term yields will be higher than most think.

Ian and Andrew start the episode by discussing Friday’s data deluge, particularly the red-hot inflation reading in the United States. Andrew talks about the implications for Canada based on the drivers of U.S. CPI strength, noting that both the near-term peak and the end-of-year resting spot have now increased. The duo spend a lot of time talking about the options for the Bank of Canada, and introduce CIBC’s new forecasts for the target rate, which is higher as a result of the data. Ian talks about why CAD rates have been underperforming of late, and why he likes being long cross-market now. Andrew finishes the episode by looking at the odd type of recession he believes could transpire if rates are risen too high.

The scorching hot CPI report has created yet another shock for the market, and the probability of an even more ‘forceful’ response from the Bank of Canada seems warranted. In this episode, Ian and Andrew do a deep dive on the latest report and talk about the many methodology adjustments StatsCan is making to the basket. The co-hosts take some time to go over the new forecasts presented in the MPR from last week, and unveil CIBC’s new policy forecast. Ian discusses why back-end rates underperformed recently, as well as some of the risks to the Bank’s QT implementation.

In the 50th episode of Curve Your Enthusiasm, Ian and Andrew begin the show discussing the strength in the recent Canadian GDP numbers. Ian talks about data sensitivity and the bond market, while Andrew highlights why he thinks the path to terminal matters. The co-hosts both outline why they think the Fed is more likely to take short-run terminal above long-run neutral, and Andrew discusses the work he is doing on Canadian NAIRU. The proximity to the federal budget sparks a conversation with the duo, and Ian outlines his expectations for bond issuance in the year-ahead.