The Bank of Canada (BoC) is poised to face intricate decisions as Canada's unemployment rate is anticipated to surpass 6% by 2024. Here's an in-depth look into CIBC's perspective:

1. Complexity in Decisions:

   Factors at Play: BoC's monetary decisions will hinge on various domestic and global factors that influence growth and employment in Canada. Given these multi-faceted influences, typical central bank behaviors are under scrutiny.

2. Applying the Taylor Rule:

   Three Variants: CIBC considers three versions of the Taylor rule to navigate the potential rate changes. These versions factor in inflation targets and economic slack to derive optimal rate adjustments.

3. Foreseeing NAIRU's Implications:

   Unemployment Projections: The pace at which unemployment approaches the Non-Accelerating Inflation Rate of Unemployment (NAIRU) is central to rate decisions. Should it reach around 6% in the near future, Taylor Rules point towards maintaining or even reducing the current rates by Q1 2024.

   Rate Hikes in 2023: Following the NAIRU method, 2023 may witness a stagnation in rate hikes, potentially lowering the rates from the current 5% by the start of 2024.

4. September's Decision:

   Impending Rate Hike: Should the BoC decide on a rate hike this September, it would be in opposition to labor market forecasts.

   Reliance on Data: CIBC highlights that BoC's imminent decisions should prioritize labor market data over fluctuating measures of the output gap.

Conclusion: As Canada grapples with potential unemployment challenges, the BoC's interest rate strategies remain a focal point. While traditional measures like the Taylor Rule provide guidance, labor market statistics emerge as a more reliable metric. The upcoming months, especially September, are crucial for BoC's policy direction