VIEW: CIBC: Dangling Hints That Lower Rates Are On The Way

CIBC’s initial reaction to the BoC decision notes that “the Bank of Canada isn’t ready, willing or able to bring interest rate relief just yet, but dangled some hints that lower rates are on the way later this year.”

• “The statement dropped the earlier reference to a potential need to hike if inflation failed to cool, changing it into a less hawkish comment that they remain “concerned” about persistent core inflation.”
• “But in a growth and inflation forecast that’s little changed for the next two years, it sees weak growth in the first half of 2024 forecast with more disinflationary slack emerging, and an output gap estimate centred on -0.75% as of the end of 2023.”
• “The pick-up in growth projected for the back half of the year might well be tied to their own expectations for lower rates at that time, since the Governor noted that the meeting has shifted from a discussion of whether rates are high enough to one about how long they need to keep rates at 5%.”
• “That’s a dovish tilt, but is still consistent with our call for a first rate cut in June, with as much at 150 bps of cuts on tap this year if, as we expect, we’ll need that to get the economy moving again after its current stall.”