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GS Push Back First BoC Cut To June From April

CANADA
  • Goldman Sachs see a combination of softer activity and firmer inflation data keeping the BoC on hold this week.
  • The BoC is expected to continue to see the economic rebalancing seen to date "as helpful for bringing inflation back towards target over the medium-run", but "the most recent inflation data—especially when combined with slower progress on wage growth, inflation expectations, and business pricing behavior—as somewhat concerning.”
  • The statement "will signal increased concern around the inflation outlook relative to December and reiterate preparedness to raise the policy rate further if necessary" whilst they expect "minimal changes to the MPR projections.”
  • “We remain confident that inflation will slow over the medium-term, but see the recent firming of the inflation trend and the limited number of CPI reports ahead of upcoming BoC meetings [only one between now and March, two between now and April] as lowering the odds of near-term cuts."
  • They therefore revise their rate forecast with the first 25bp rate cut in June (vs. April previously) but still see 100bp of rate cuts in 2024 overall. They see a terminal rate of 3.25% in 3Q25.
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