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BoC Minutes Watched For Back-to-Back Rate Cut Implications

CANADA
  • At 1330ET, the BoC releases its Summary of Deliberations for the Jun 5 meeting when it cut the overnight rate 25bp to 4.75% for the first time this cycle.
  • Governing Council at the time noted that monetary policy “no longer needs to be as restrictive”. Further, “if inflation continues to ease, and our confidence that inflation is headed sustainably to the 2% target continues to increase, it is reasonable to expect further cuts to our policy interest rate. But we are taking our interest rate decisions one meeting at a time.”
  • Cautioning, it added that “if we lower our policy interest rate too quickly, we could jeopardize the progress we’ve made.”
  • However, Gov. Macklem said in the press conference that “there are limits to how far we can diverge from the United States and we aren’t close to those limits”, a point that was then reiterated last week on Jun 12.
  • BoC-dated OIS shows a sizeable 17bp of cuts priced for the July meeting. We don’t expect much change on these minutes alone with retail sales on Fri and more importantly CPI on Tue on the horizon, although any surprises today could provide nuance to data reactions.
  • Markets will likely be particularly thin with US futures closing early for the Juneteenth holiday (cash already closed).
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