MNI BoC Preview, Sep'24: Low Bar For A Third Cut Has Been Met

Executive Summary

• The BoC is more than fully priced to opt for a third consecutive 25bp cut on Wednesday to 4.25%.
• Analysts are on balance marginally more hawkish as 4 of 34 look for no change, although that has recently narrowed and the rest all look for a 25bp cut.
• It’s a non-MPR meeting although we still of course have a press conference per this year’s new approach.
• We expect broadly similar dovish language as seen in July. The latest CPI report gives the BoC increased confidence that inflation heads in the right direction, allowing for more focus on widening excess supply.
• That should tee up scope for further rate cuts. However, with the market pricing 75bp of cuts over the three meetings left this year, there should only be material market reaction if it signals greater willingness to cut 50bps or, on the flip side, potential for a pause.
• Most analysts don’t entertain 50bp cuts in their rate forecasts although Citi explicitly call for a 50bp cut in October and BMO view it as “very doable”.
• With Governor Macklem likely to reiterate a need to decide at a meeting-by-meeting basis, it’s quite possible that Friday’s labour force survey for August will be more impactful.
• A trimming of extremely large CAD net shorts introduces some slightly more two-sided risks from surprises.

Please find the full report here: BOCPreviewSep2024.pdf