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CANADA: BMO: Two Additional Cuts For The BoC, One For The Fed

CANADA
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  • BMO write that the time has come “to let go of the sticky inflation mantra”.
  • They now expect the BoC to take rates below 3% “probably more forcefully, and almost certainly much sooner”, adding two additional 25bp cuts in 1H25.  
  • They see the Bank on “a forced march” of seven consecutive 25bp cuts after the three already made, leaving the policy rate at 2.5% by July.
  • “The key change there is we now see the Bank taking the rate below what we consider to be neutral (closer to 3%), and that change has been prompted by the run-up in the jobless rate to 6.6%.”
  • In the US, “this week’s so-so August CPI seemingly locked in a 25 bp cut, although there are still plenty of voices opting for a more aggressive 50 bp start.”
  • They stick with their call for a 25bp cut in September but have added an additional cut in their forecast.  "[W]e look for a steady series of 25 bp cuts, slowing only in [2H25] and ultimately ending at just below 3% by early 2026”.
  • “The risk to that call continues to be a faster and eventually deeper drop in rates, especially if the job market weakens materially further.” 
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  • BMO write that the time has come “to let go of the sticky inflation mantra”.
  • They now expect the BoC to take rates below 3% “probably more forcefully, and almost certainly much sooner”, adding two additional 25bp cuts in 1H25.  
  • They see the Bank on “a forced march” of seven consecutive 25bp cuts after the three already made, leaving the policy rate at 2.5% by July.
  • “The key change there is we now see the Bank taking the rate below what we consider to be neutral (closer to 3%), and that change has been prompted by the run-up in the jobless rate to 6.6%.”
  • In the US, “this week’s so-so August CPI seemingly locked in a 25 bp cut, although there are still plenty of voices opting for a more aggressive 50 bp start.”
  • They stick with their call for a 25bp cut in September but have added an additional cut in their forecast.  "[W]e look for a steady series of 25 bp cuts, slowing only in [2H25] and ultimately ending at just below 3% by early 2026”.
  • “The risk to that call continues to be a faster and eventually deeper drop in rates, especially if the job market weakens materially further.”