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CANADA: Desjardins: Now See Brief BoC Pause In March, Still Eye 2% Terminal

CANADA
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  • “The decision to cut rates another 50 basis points today reflects the BoC’s desire to get to the same destination via a slightly different route than we had anticipated.”
  • “That said, the forward guidance accompanying today’s rate decision suggests that the monetary policy reaction function being employed is largely as we had expected.”
  • “Our interest rate outlook is, therefore, little changed. Instead of cutting rates 25 basis points at each of its first three decision dates of 2025, we now see the Bank of Canada briefly pausing in March after beginning the year at a lower level. That leaves our mid-2025 and end of year projections intact at 2.75% and 2.25%, respectively.”
  • “We are also retaining our call for a terminal rate of 2.00% to be reached in 2026, in light of our forecast that Canada will face at least some tariffs on exports headed to the US.”
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  • “The decision to cut rates another 50 basis points today reflects the BoC’s desire to get to the same destination via a slightly different route than we had anticipated.”
  • “That said, the forward guidance accompanying today’s rate decision suggests that the monetary policy reaction function being employed is largely as we had expected.”
  • “Our interest rate outlook is, therefore, little changed. Instead of cutting rates 25 basis points at each of its first three decision dates of 2025, we now see the Bank of Canada briefly pausing in March after beginning the year at a lower level. That leaves our mid-2025 and end of year projections intact at 2.75% and 2.25%, respectively.”
  • “We are also retaining our call for a terminal rate of 2.00% to be reached in 2026, in light of our forecast that Canada will face at least some tariffs on exports headed to the US.”