The BoC is widely expected to cut rates again to the middle of its estimated range for neutral as tariff threats mount
- The Bank of Canada is expected to cut its overnight rate target another 25bp on Wednesday to 2.75%.
- It’s quite likely that a pause would have been seriously considered if going on recent economic trends alone and after 200bp of cuts.
- But easing 25bp to the mid-point of the BoC’s estimated neutral range of 2.25-3.25% appears the prudent choice (and 100% priced by OIS markets) given the context of an escalating US-Canada trade war that presents risks of both higher inflation and weaker growth.
- With no Monetary Policy Report to be released, and no new guidance expected, most attention will be on the press conference which is likely to convey a cautious tone, reflecting Governor Macklem’s earlier warning that “we can’t lean against weaker output and higher inflation at the same time."
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