MNI BoC Preview, Jul'24: A Back-To-Back Cut But Beware Betting On A Third
Jul-22 15:41By: Chris Harrison
Executive Summary
- The BoC is widely but not unanimously expected to cut for a second consecutive meeting this week, taking its overnight rate to 4.5%.
- Recent core inflation trends have reversed the particularly impressive progress seen earlier in the year but remain within the inflation target band.
- The Bank doesn’t have a dual mandate but the continued rise in the unemployment rate should help see a cut this meeting. However, that recent push higher in core inflation could warrant caution ahead.
- We expect a cut this week although feel the 23bp of cuts priced overstates its likelihood.
- We also see the additional half a 25bp cut priced for September at risk of being trimmed with this meeting although it will remain heavily data dependent in the lead up to that decision.
- We can’t rule out Q&A clues on balance sheet policy tweaks considering renewed overnight pressures in the past few days, although the Bank has proven reluctant to shift from the current passive approach.
- CAD net shorts are at historical extremes, potentially limiting scope for dovish reaction.
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