The Bank of Canada is expected to cut 50bps for a second meeting with its policy rate reaching the top end of neutral
MNI (LONDON) - EXECUTIVE SUMMARY
- The BoC is mostly priced to cut its policy rate by 50bps for a second consecutive meeting, with last week’s strong increase in the unemployment rate playing a significant role.
- We expect the statements to point to a need for further rate cuts ahead but will be keenly watching for any more explicit signs that the pace of easing could slow.
- A 50bp cut would see the overnight rate target at 3.25%, the top of the Bank’s estimated neutral rate range of 2.25-3.25% after 175bp of cuts since June.
- We watch for broader signs of cautious optimism as the economy starts to react to less restrictive monetary policy and for any concerns of fiscal policy or a net stance on potential tariff disruption.
- USDCAD has climbed almost 3% since the last meeting to nearly 1.42 ahead of the decision, buoyed by tariff threats and a further widening in yield differentials. The level could limit further increases in the near term although a repeat that differentials with US monetary policy aren’t close to binding or a lack of concern about CAD weakness could offer a further boost.
PLEASE FIND THE FULL REPORT HERE:BOCPreviewDec2024.pdf
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