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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Canada's central bank is seen cutting interest rates for a second meeting on Wednesday, with inflation moving back to target and slack in the labor market pointing to less need for restrictive policy.
Nineteen of 23 economists surveyed by MNI see a quarter-point reduction to 4.5% in the decision due at 9:45am EST, with the rest saying the Bank of Canada will skip this decision and move in September.
Governor Tiff Macklem led G7 nations June 5 with a cut from the highest policy rate since 2001, saying he's more confident inflation is settling down and that more reductions can be justified if that trend continues. Inflation slowed to 2.7% in the June figures released Tuesday, after moving up to 2.9% in May, the kind of bump Macklem said could happen on the way back to target.
With inflation lingering above the 2% goal for three years officials have cautioned the pace of cuts will be moderate, and it is unclear whether this decision will again reference the potential for multiple cuts. Macklem has said he is nowhere near the limit of how much he can diverge from the Fed, and that the Bank does not have to crush the economy with tight policy to restore price stability.
NEW TIMING ON MEETING TARGET?
Officials are looking at a broader range of inflation measures such as wage gains and corporate pricing power and have said there are broad signs of relief since their 10 prior rate hikes. While some wage measures still top 5% the jobless rate has climbed more than a percentage point in the last year amid record immigration. (See MNI INTERVIEW: BOC To Slowly Cut To Neutral Over 2 Yrs- Stillo)
Canada’s stretched housing market has also remained tame since June’s rate cut, rather than moving into yet another cycle of froth that could make cutting rates more difficult. Officials instead have scope to help borrowers being hit with painful re-financings of popular fixed-rate mortgages that reset every five years.
One signal of the Bank's intentions would be a new economic forecast and a nudge to the view that inflation will return to the 2% target sometime in 2025. Core inflation rates have slowed back within the Bank's 1% to 3% target range, which should give officials more certainty about where things are headed.
Macklem has signaled there's no pre-programmed rate path, either for the cut-at-every-meeting some economists predict or moving every second decision. "If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2% target continues to increase, it is reasonable to expect further cuts to our policy interest rate," he told reporters after the June cut. "But we are taking our interest rate decisions one meeting at a time."
Canadian inflation rate, headline and ex-gasoline
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.