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Posthaste: Here's what will convince the Bank of Canada to hold the line on rates

Bank of Canada Governor Tiff Macklem takes part in an interview in Ottawa
Bank of Canada Governor Tiff Macklem takes part in an interview in Ottawa


Good morning!

Many Canadians breathed a sigh of relief when the Bank of Canada signalled at its last interest rate meeting on Jan. 25 that it would likely pause further hikes to assess whether it had done enough to quell inflation.

So far, the bank has raised rates 425 basis points — a historic run in speed and trajectory — to 4.5 per cent from 0.25 per cent in March 2022. It has said it needed to do so to get a handle on inflation, which peaked at 8.1 per cent in June 2022, well outside the bank’s target range of one to three per cent. Inflation currently sits at 6.3 per cent.

But that leaves us wondering what data the bank will be tracking to confirm it can hold off on further hikes. Avery Shenfeld, chief economist at CIBC Capital Markets, in a recent analysis said it won’t be the usual suspect, the output gap, a measure of how much the economy is producing against how much it can produce. Instead, he believes the Bank of Canada will keep its eye fixed on labour data.

“It’s apparent that rather than look at economic output, the bank is focused on tightness in one key input: labour,” he said, adding that the unemployment rate, the number of job vacancies and total hours worked will likely be the best predictors. “For our part, we’re looking for enough signs of slack in these measures to keep that pause in place, but not a rapid enough turn of events to allow an easing in rates until 2024.”

Shenfeld said roof of the Bank of Canada’s focus can be found in its most recent Monetary Policy Report (MPR), in which the bank mentioned labour markets first “as the indicator that the economy is in excess demand.”

Canada’s labour market has put up some pretty stunning numbers during the past few years, which has only fuelled inflation and forced the central bank to end its cheap-money policies.

Right now, it’s hard to find slack in jobs measures, but economists believe signs are beginning to materialize.

The unemployment rate currently stands at five per cent, just above its historic low of 4.9 per cent in July 2022. Canada’s economy is considered to be in full employment, meaning all those who wish to work can find a job. A higher unemployment rate would signal some give in the labour market. The 10-year average for the jobless rate is 6.8 per cent.

Historically high job vacancies have plagued the labour market for a while, creating tight hiring conditions for employers. There were 823,484 open positions in Canada as of November 2022, Statistics Canada reported, still elevated, but a significant drop from the record 1,035,755 openings reported last May.

“While businesses are still struggling to find staff, the drop in job openings is an early indicator that the overheated labour market may be about to cool,” Helene Begin, principal economist at Desjardins Economics, said in a note on Jan. 27.

Total hours worked, another one of the measures Shenfeld is watching, rebounded after plummeting during the depths of the pandemic. They currently sit above levels recorded prior to 2020, although the number of hours worked “has stopped growing,” Begin said, and have “even begun to fall in some provinces, including Quebec. Hours worked aren’t a foolproof indicator, but they tend to show where employment is headed.”

National Bank of Canada economists are on the same page when it comes to the role of the jobs market in determining what happens next with rates.

“Of course, inflation data will still be the key determinant in future decisions” — something Shenfeld doesn’t agree with — “but the bank is also surely hoping to see some slack open up in the labour market in the coming months too,” economists Taylor Schleich, Jocelyn Paquet and Warren Lovely said in a note following the Jan. 25 rate increase.



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The United States Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.

Chair Jerome Powell and fellow policymakers lifted the Fed’s target for its benchmark rate by a quarter percentage point to a range of 4.5 per cent to 4.75 per cent. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that. “We think we’ve covered a lot of ground,” Powell told reporters after the meeting. “Even so, we have more work to do.”

— Bloomberg


  • The parliamentary budget officer will post a costing note entitled “A Tax on Share Buyback” on the website at

  • Edmonton International Airport (YEG) will host a media availability with Myron Keehn, president and CEO of YEG, and share final passenger numbers, reflect on exciting milestones and talk about what’s in store for 2023

  • Tourism Minister Randy Boissonnault will make an announcement on clean electricity

  • Real Estate Board of Greater Vancouver releases January home sales figures

  • TransLink CEO Kevin Quinn and representatives from the Federal, Provincial, and local governments will announce an expansion to TransLink’s battery-electric bus fleet

  • Selina Robinson, Minister of Post-Secondary Education and Future Skills, Andrew Mercier, Minister of State for Workforce Development, Jennifer Whiteside, Minister of Mental Health and Addictions, and others will make an announcement about health-care training

  • A public information session will highlight local government-led efforts to explore how a modernized Columbia River Treaty could better support social and economic interests in the Canadian Columbia Basin. This is the second session of two

  • Today’s data: Canadian building permits; U.S. Challenger layoff report, initial jobless claims, productivity, factory orders

  • Earnings: Rogers Communications Inc., BCE Inc., Canada Goose Holdings Inc., Brookfield Infrastructure Corp., Lightspeed Commerce Inc., Open Text Corp., Methanex Corp., Apple Inc., Inc., Shell Plc, ConocoPhillips, Starbucks Corp., Sony Corp., Ford Motor Co., Mitsubishi Motors Corp., Resolute Forest Products Inc.




Interest rates are higher than they have been in a while and that has put savings accounts back on Canadians’ radars. Our content partner MoneyWise breaks down the value of a high-interest savings accounts (HISA). If you’re trying to save for a short-term goal, like taking a vacation, or are looking for a safe place to store your emergency fund, then a HISA can be just what you need to maximize your savings. HISAs will earn higher monthly interest than a chequing account, and the best ones will also offer low fees. While they offer better interest rates than a regular savings account, HISAs also tend to come with more restrictions or conditions. Read here to find out more.


Today’s Posthaste was written by Gigi Suhanic (@gsuhanic), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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