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MNI BoC Review, Dec'24: ‘Hawkish’ 50bp Cut Delivered

The BoC did indeed opt for a 'hawkish' 50bp cut, eyeing a more gradual approach to cuts ahead, amidst major uncertainty
Bank of CanadaCentral Bank ReviewCentral Bank NewsBoC - ReviewCanadaCentral Bank ReportsMarketsStoryNorth America

MNI (LONDON) - Executive Summary

• The BoC cut its policy rate by 50bp to 3.25% for a “substantial” 175bp of easing since June.
• It had been mostly priced (45bp) but the more notable change was an explicit push for a more gradual approach ahead – the main risk we’d flagged in the preview – driven by the return to the upper end of its estimated neutral rate range with no longer a need for “clearly restrictive” policy.
• It removed the explicit guidance on expecting further rate cuts ahead although that clearly remains the trend direction if the economy evolves as anticipated.
• Markets reacted hawkishly to the decision but from a particularly dovish starting point. Analysts meanwhile continue to expect a terminal rate below that priced by the market.
• Monday’s Fall Economic Statement, data and US trade policy steers ahead of President-elect Trump’s inauguration on Jan 20 are all going to be in the driving seat ahead of the next BoC decision on Jan 29 including its quarterly Monetary Policy Report. For now, OIS prices about 18.5bp of cuts for the meeting.

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MNI (LONDON) - Executive Summary

• The BoC cut its policy rate by 50bp to 3.25% for a “substantial” 175bp of easing since June.
• It had been mostly priced (45bp) but the more notable change was an explicit push for a more gradual approach ahead – the main risk we’d flagged in the preview – driven by the return to the upper end of its estimated neutral rate range with no longer a need for “clearly restrictive” policy.
• It removed the explicit guidance on expecting further rate cuts ahead although that clearly remains the trend direction if the economy evolves as anticipated.
• Markets reacted hawkishly to the decision but from a particularly dovish starting point. Analysts meanwhile continue to expect a terminal rate below that priced by the market.
• Monday’s Fall Economic Statement, data and US trade policy steers ahead of President-elect Trump’s inauguration on Jan 20 are all going to be in the driving seat ahead of the next BoC decision on Jan 29 including its quarterly Monetary Policy Report. For now, OIS prices about 18.5bp of cuts for the meeting.

Keep reading...Show less