Commentary

Bank of Canada Preview: Holding for the Holidays
Benjamin Reitzes
BMO Canadian Rates & Macro Strategist

The Bank of Canada is widely expected to hold policy rates
steady at 2.25% on December 10. Governor Macklem has emphasized that only a
significant deterioration in the economic outlook would prompt further rate
cuts. After pausing earlier this year to assess conditions, the Bank appears
set for another multi-month hold. There’s been plenty of top-tier data since
the last meeting, but nothing to move the needle on policy. Still, the economic
risks remain skewed to the downside amid persistent trade uncertainty. On the
flip side, if/when a trade deal is reached, we could see a wave of investment
and hiring from businesses who are currently frozen due to the uncertainty.

Since the October rate cut, the data have been mixed. Job
growth rebounded after the summer weakness, with another blowout gain in
November. After spending most of the year around 7.0%, consistent with a
moderate output gap, the unemployment rate pulled back sharply in Q4 suggesting
the economy is hanging in there for now. Meantime, slowing wage gains will ease
inflation pressure over time. The labour market is a potential vulnerability
for Canada. While businesses have slowed hiring amid the uncertain backdrop,
layoffs have been generally limited to sectors that are facing sectoral
tariffs. If that changes, household spending, which has been surprisingly resilient,
could weigh heavily on growth.

Perhaps the most impactful data release was Q3 GDP, and the
accompanying massive upward revisions to growth over the past few years. The
cumulative revisions added 1.4% to GDP, and upgraded average quarterly growth
in 2024 to 3.1% from 2.3% previously. It makes one wonder if the BoC would have
eased policy as much as it did if it had known how solid momentum was. The
firmer economic backdrop could also help explain why core CPI has been stickier
than expected. Indeed, the GDP revision points to a potentially narrower output
gap, and the accompanying upgrade to productivity pushes unit labour costs
down, which is friendly for inflation. Separately, the federal budget was
released after the last decision and contained additional stimulus measures.
While the latter were mostly announced pre-budget and therefore accounted for
by the BoC, there was some additional spending which should provide a boost to
the Bank’s growth outlook.

On the inflation front, the latest reading had something for
everyone. The trim and median cores slowed, while headline ticked down as well,
though not as much as anticipated. There was also improvement in the six-month
annualized rates, pointing to a further deceleration in the months ahead. While
those moves were encouraging, there are plenty of reasons for inflation angst.
CPIX (old core CPI) accelerated to 2.9%, the fastest pace in over two years,
and the trim and median remain very close to 3%. What’s particularly worrying
is that food inflation is poised to accelerate from the mid-3% levels seen
since March. And, this relatively sticky inflation backdrop comes as oil prices
have been very well behaved. Still, those upside risks face output gap-drivendisinflation
(even if the size of the gap may not be quite as large as thought).

Key Takeaway: The Bank of Canada made it clear in October
that they’re moving to the sideline unless the economy or inflation materially
undershoot their forecast. Since then, the data have largely been in line with
the BoC’s bias to pause. The risks remain skewed to the downside due to the
trade backdrop, but until/unless they crystalize, the Bank appears content to
spend the holidays on hold.

‘Oh, my God’ — 88-year-old Michigan grocery cashier
overwhelmed by sudden $1.7M gift

BRIGHTON, Mich. (AP) — Ed Bambas will soon ring up his last
can of corn.

The 88-year-old Michigan grocery worker was handed an
oversized check for $1.7 million Friday, the result of a remarkable fundraising
campaign by a young Australian man with an extraordinary following on social
media.

“No, no,” Bambas said, wiping tears and sniffles in front of
reporters. “Thank you. Oh, my God.”
Sam Weidenhofer, 22, is using his powerful platforms to
spread kindness — and money — on a visit to the United States.

He met Bambas at a Meijer store in Brighton in southeastern
Michigan about two weeks ago and recorded a TikTok video for his 7.7 million
followers in which the General Motors retiree explained why he’s still working
as he approaches 90, following the death of his wife, Joan, after a chronic
illness in 2018.

“I don’t have enough income,” Bambas said on the video.
Weidenhofer in turn launched an online GoFundMe drive,
urging people to help Bambas.

“His story is a stark reminder that too many of our seniors,
especially veterans face incredible challenges just to survive,” said
Weidenhofer, who’s from Melbourne, Australia, and has more than 10 million
followers on various social media sites.

The response was dizzying: More than 15,000 people have
pitched in with donations ranging from $10 to $10,000.
“It means a terrible burden,” Bambas jokingly told
reporters. “I have to find everybody and say, ‘thank you.’”

He said he started working at Meijer, a big-box store with
groceries, clothes and other items, at age 82.

“I talk to everybody that came through my cashier line
because it helped me not become despondent on her loss. ... I gave them a piece
of my life story,” Bambas said, referring to his wife.

Lexi Wallace, 26, who used to be a regular customer before
moving away, went on Weidenhofer’s Facebook page and urged him to find Bambas.

“I thought his name was Bob. He never corrected me,” Wallace
said. “I would love going to Meijer to see him.”

Weidenhofer said Bambas will be able to clear $225,000 in
debt with the windfall. How he spends the rest of the money is totally up to
him.
“It feels like a dream,” Weidenhofer said.

Bambas wants to travel to see his brother and pick up golf
again. As for work, he’s not quitting his cashier post yet.

“I’ll probably work another month or two and shut things
down,” he said.