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CANADA: Analysts Not Deterred By Strong Canadian Jobs Report

CANADA
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As opposed to multiple analyst Fed view changes following Friday's payrolls report, a strong Canadian jobs report released simultaneously hasn't drawn the same response. There remain various views for terminal rates of 2.25% (bottom of BoC's 2.25-3.25% neutral estimates) or possibly below, in contrast to the market where OIS currently points to only 42bp of cuts to 2.86% in 2025. 

  • BMO: "The solid job gains will prompt some meaningful doubt on whether the Bank of Canada will cut again in January following the hyper aggressive 100 bps of cuts in Q4. The fact that the Fed looks to move to the sidelines for a spell, and the Canadian dollar is struggling mightily may also chill the BoC for now."
  • CIBC: "With rates still above the mid-point of the neutral range, unemployment elevated relative to a year ago, and huge uncertainty emanating from the threat of US tariffs, we continue to forecast a 25bp reduction at the January meeting and a 2.25% trough for the overnight rate later this year."
  • Desjardins: "We remain of the view that the Bank will cut the overnight policy rate by another 25 basis points later this month, then take a break in March. After that, it should continue a gradual pace of rate cuts through the rest of the year." 
  • GS: "While today's data was firm on net, we continue to expect four 25bp cuts for a 2.25% terminal rate by mid-year."
  • JPM: "We still look for another 25bp rate cut by the BoC later this month, but risks have shifted from continuing with 50bp moves to potentially pausing."
  • National: " Given these many uncertainties and the BoC's desire to create conditions conducive to above-potential growth (and a stabilization of the labour market), we continue to believe that the BoC will have to cut its policy rate to the lower end of its neutral range (between 2.25% and 3.25%) by the summer. This assumes that today's report is not the new norm for the Canadian labour market." 
  • RBC: "We continue to expect that ultimately the BoC will need to cut the overnight rate to slightly 'stimulative' levels this year - below the 2.25% to 3.25% the BoC currently estimates as the likely range for the current neutral rate.
  • Scotia: "If it were only up to jobs, the BoC would be on the sidelines but more important information lies ahead on tariffs and Canada’s response."
  • TD: "Today's report has shifted the discussion around the January BoC decision, but we do not believe it will keep the Bank from cutting another 25bps to 3.00%. The unemployment rate is still sitting well above NAIRU, and the 6m employment trend continues to lag reported population growth. The path from January onwards looks more uncertain with stronger momentum entering 2025, but with global trade risks set to intensify over the coming months we continue to look for the BoC to end the cycle below neutral."
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As opposed to multiple analyst Fed view changes following Friday's payrolls report, a strong Canadian jobs report released simultaneously hasn't drawn the same response. There remain various views for terminal rates of 2.25% (bottom of BoC's 2.25-3.25% neutral estimates) or possibly below, in contrast to the market where OIS currently points to only 42bp of cuts to 2.86% in 2025. 

  • BMO: "The solid job gains will prompt some meaningful doubt on whether the Bank of Canada will cut again in January following the hyper aggressive 100 bps of cuts in Q4. The fact that the Fed looks to move to the sidelines for a spell, and the Canadian dollar is struggling mightily may also chill the BoC for now."
  • CIBC: "With rates still above the mid-point of the neutral range, unemployment elevated relative to a year ago, and huge uncertainty emanating from the threat of US tariffs, we continue to forecast a 25bp reduction at the January meeting and a 2.25% trough for the overnight rate later this year."
  • Desjardins: "We remain of the view that the Bank will cut the overnight policy rate by another 25 basis points later this month, then take a break in March. After that, it should continue a gradual pace of rate cuts through the rest of the year." 
  • GS: "While today's data was firm on net, we continue to expect four 25bp cuts for a 2.25% terminal rate by mid-year."
  • JPM: "We still look for another 25bp rate cut by the BoC later this month, but risks have shifted from continuing with 50bp moves to potentially pausing."
  • National: " Given these many uncertainties and the BoC's desire to create conditions conducive to above-potential growth (and a stabilization of the labour market), we continue to believe that the BoC will have to cut its policy rate to the lower end of its neutral range (between 2.25% and 3.25%) by the summer. This assumes that today's report is not the new norm for the Canadian labour market." 
  • RBC: "We continue to expect that ultimately the BoC will need to cut the overnight rate to slightly 'stimulative' levels this year - below the 2.25% to 3.25% the BoC currently estimates as the likely range for the current neutral rate.
  • Scotia: "If it were only up to jobs, the BoC would be on the sidelines but more important information lies ahead on tariffs and Canada’s response."
  • TD: "Today's report has shifted the discussion around the January BoC decision, but we do not believe it will keep the Bank from cutting another 25bps to 3.00%. The unemployment rate is still sitting well above NAIRU, and the 6m employment trend continues to lag reported population growth. The path from January onwards looks more uncertain with stronger momentum entering 2025, but with global trade risks set to intensify over the coming months we continue to look for the BoC to end the cycle below neutral."