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Bank of Canada set to cut rates as jobs data, trade hit economy
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The Bank of Canada is expected to lower its overnight rate by 25 basis points at its upcoming policy meeting, as weakening labour market conditions and slowing economic activity add pressure for monetary easing, as per a Reuters poll.
A majority of analysts also anticipate at least one more cut in the following quarter.
Official data last week showed Canada lost 65,500 jobs in August, lifting the unemployment rate to a nine-year high outside of the pandemic.
A sharper-than-expected 1.6% contraction in economic activity last quarter, driven by weaker exports hit by US tariffs on steel, aluminium and automobiles, added to pressure on policymakers.
The figures fuelled expectations of further monetary easing and pushed the Canadian dollar lower.
The anticipated move on September 17 would signal a return to policy easing after the central bank held rates stable since March.
That pause came after a total 225-basis-point drop, already among the steepest in the G10.
Seven economists said they expected rates to remain unchanged.
The poll majority favours easing
Nearly 80% of economists, or 25 of 32 surveyed in a Reuters poll conducted between September 9 and 12, said the Bank of Canada would cut its key rate by 25 basis points to 2.50% at its next meeting.
That marks a larger majority than the 64% recorded in a July poll and is consistent with market pricing.
Seven economists predicted that policymakers would keep interest rates unchanged.
Among Canada’s five largest banks, the Royal Bank of Canada (RBC) was the only one anticipating no change, based on inflation figures released the day before the meeting.
Inflation still in target range
Headline inflation has stayed within the Bank of Canada’s 1% to 3% target since January 2024, though core inflation remains elevated.
Economists at Laurentian Bank Securities said persistent price pressures mean the central bank is unlikely to deliver larger moves in a single meeting or steer policy toward a terminal rate as low as 1.0%–1.5%.
“Even with weak real GDP momentum and further deterioration of labour market conditions, surveys show that Canadian CPI inflation is unlikely to fall significantly,” the economists were quoted in the Reuters report.
“This rules out a 50 basis point cut in a single meeting or a BoC terminal rate closer to 1.0%–1.5%.”
Looking ahead, more than 70% of analysts, or 23 of 32 polled, expect the policy rate to fall by another 50 basis points in 2025 to 2.25% or below.
Six projected cuts totalling 75 basis points.
Median forecasts in the Reuters poll indicate the key rate stabilising at 2.25% for all of next year, implying policymakers would rather pause once a modest easing cycle is over.
The post Bank of Canada set to cut rates as jobs data, trade hit economy appeared first on Invezz
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Bank of Canada set to cut rates as jobs data, trade hit economy
Share:
The Bank of Canada is expected to lower its overnight rate by 25 basis points at its upcoming policy meeting, as weakening labour market conditions and slowing economic activity add pressure for monetary easing, as per a Reuters poll.
A majority of analysts also anticipate at least one more cut in the following quarter.
Official data last week showed Canada lost 65,500 jobs in August, lifting the unemployment rate to a nine-year high outside of the pandemic.
A sharper-than-expected 1.6% contraction in economic activity last quarter, driven by weaker exports hit by US tariffs on steel, aluminium and automobiles, added to pressure on policymakers.
The figures fuelled expectations of further monetary easing and pushed the Canadian dollar lower.
The anticipated move on September 17 would signal a return to policy easing after the central bank held rates stable since March.
That pause came after a total 225-basis-point drop, already among the steepest in the G10.
Seven economists said they expected rates to remain unchanged.
The poll majority favours easing
Nearly 80% of economists, or 25 of 32 surveyed in a Reuters poll conducted between September 9 and 12, said the Bank of Canada would cut its key rate by 25 basis points to 2.50% at its next meeting.
That marks a larger majority than the 64% recorded in a July poll and is consistent with market pricing.
Seven economists predicted that policymakers would keep interest rates unchanged.
Among Canada’s five largest banks, the Royal Bank of Canada (RBC) was the only one anticipating no change, based on inflation figures released the day before the meeting.
Inflation still in target range
Headline inflation has stayed within the Bank of Canada’s 1% to 3% target since January 2024, though core inflation remains elevated.
Economists at Laurentian Bank Securities said persistent price pressures mean the central bank is unlikely to deliver larger moves in a single meeting or steer policy toward a terminal rate as low as 1.0%–1.5%.
“Even with weak real GDP momentum and further deterioration of labour market conditions, surveys show that Canadian CPI inflation is unlikely to fall significantly,” the economists were quoted in the Reuters report.
“This rules out a 50 basis point cut in a single meeting or a BoC terminal rate closer to 1.0%–1.5%.”
Looking ahead, more than 70% of analysts, or 23 of 32 polled, expect the policy rate to fall by another 50 basis points in 2025 to 2.25% or below.
Six projected cuts totalling 75 basis points.
Median forecasts in the Reuters poll indicate the key rate stabilising at 2.25% for all of next year, implying policymakers would rather pause once a modest easing cycle is over.
The post Bank of Canada set to cut rates as jobs data, trade hit economy appeared first on Invezz
In This News
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In This News
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Weak labour market, not inflation, will drive multiple Fed rate cuts in 2026, says Commerzbank