What will Tiff do?

Will rates drop tomorrow?

Since this is democratic blog without corporate ownership, advertisers, allegiances, political affiliations or, apparently, any discernible purpose, we’re letting you vote. On Wednesday morning, will the Bank of Canada do what the herd of economists expects, and drop its key rate? Or, as some outliers urge, do zip?

Cast your ballot below. We’ll all see the news tomorrow at 9:45 am ET. (Tiff speaks at 10:30.)

Mr. Market is betting 60% on a quarter-point drop, taking the policy rate below 5% and the bank prime to 6.95%. Variable-rate mortgages will fall immediately. Fivers are already reflecting an anticipated decline.

Why would the Bank of Canada ease off when inflation is still above its 2% target, the economy continues to grow amid a population surge and only fentanyl dealers and Nvidia investors (plus Drake) can afford a house?

Because the CPI has gone from over 8% to below 3% and stayed there for a few months. This has happened without crashing the economy, which still grows. But unemployment has crept higher, past 6%, the pace of economic growth is too slow, new home construction has collapsed and there are real fears if rates stay elevated we’re just begging for a recession. In that scenario, the jobless ranks would swell, tax revenues would fall, public debt would shoot higher, housing starts would disappear and we’d be going into the turmoil, of a potential Trump protectionist presidency in a weakened, vulnerable state.

So why risk it? Just cut the rate.

But on the other hand, there might be real danger in dropping the cost of money at this time. The chief Chicken Little on this issue sis Scotia’s cowboy economist Derek Holt. He argues it’s w-a-y too early to cut rates for a myriad of reasons. Like Tiff’s creds, since the bank boss said just a month ago that more time is needed to assess things. “Canadians want to know is when we will lower our policy interest rate. The short answer is we are getting closer. We are seeing what we need to see. We just need to see if for longer to be confident that progress toward price stability will be sustained.”

Holt argues we have not yet seen sustained evidence inflation is cooked. He also worries about pulling the rate trigger here months and months before the Fed does. That would hurt the loonie and maybe rekindle prices. The argument against a rate cut is also based on the fact our economy is doing just fine, so why now? Plus, we’re still in the spring housing season, and “the BoC should be very careful that cutting now would light up the market.”

Rock. Hard place. The timing of this rate cut – this week, next month or the fall – is consequential as it signals a huge pivot by the CB from tightening credit to easing up on it. The brake will be replaced by hitting the gas. Cheaper money stimulates borrowing, spending, expansion and growth. Markets love it. Realtors crave it. Lenders live or die by it. Along with corporate earnings, this is the most significant driver of financial markets..

So what will Tiff do? Tell me:

About the picture: “I’m a sporadic long time reader and as the obligatory suck up will say I admire your wisdom and courage of conviction,” writes Scott.  “I am presently a renter and have been for the past 8 years when we moved down from northern Canada to finish my government career (don’t judge). I’m sending you a picture of my Bichon, Gypsie. She is the beneficiary of many walks due to my astonishment about why the bank seems to reluctant to lend me money!  She’s a bit tuckered out in this photo. Thanks for your blog. You’re a righteous dude.”

To be in touch or sed a picture of your beast, email to ‘[email protected]’.