Analysts On Further BoC Cuts

A majority of the below see two additional cuts for remaining meetings this year (including Desjardins pulling forward a cut to September) whilst TD acknowledge downside risk to their prior call for a year-end rate of 4.25%.

• BMO: “The door is still open for additional cuts, and September is very much on the table if the next core CPI print behaves (think +0.2% m/m or lower). The tone of today's many remarks almost seems to suggest that the Bank now needs to be convinced not to keep trimming rates. We continue to look for two more rate cuts before the end of 2024, taking the overnight rate down to 4%, with the precise timing over the next three meetings driven by the incoming data—with CPI on centre stage, but the unemployment rate now dancing close to the limelight as well.”
• CIBC: “The BoC continues to expect that growth in the economy will accelerate quite quickly in [2H24], albeit not by enough to disrupt the easing path of inflation. We think it will take a bit more time for the reduction in interest rates to bring a reacceleration in growth, and as a result our current forecast for Q3 GDP is weaker than the MPR projection of 2.8%. Weaker growth and continued easing in inflation will likely bring two further interest rate cuts in September and October, to end the year at 4.00%.”
• Desjardins: “The dovish language in the releases paints a picture of officials who are growing more worried about the likelihood of recession. As a result, we are pulling forward our rate cut expectations to forecast another move in September. We now expect the BoC to reduce rates in September and then again in October before pausing in December to assess how lower rates are impacting the economy and inflation.”
• RBC: “The interest rate cut today from the Bank of Canada marks a continuation in the central bank’s effort to lower interest rates back towards “normal” levels, amid signs of slowing inflation. […] Our expectation remains that there will be two additional rate cuts this year, one at each meeting after today’s meeting that will lower the overnight rate to a still restrictive 4% by the end of 2024.”
• TD: “In our June outlook, we'd incorporated a year-end target of the 4.25%, with the final cut set to take place in the fourth quarter. While the ultimate destination may remain the same, the dovish lean in today's Statement raises the risk of more easing by year-end than what we've penciled in.”