The BoC expects to continue cutting rates until 2024, says ING By Investing.com

The Bank of Canada (BoC) is on track to continue its rate-cutting cycle next year, potentially lowering the policy rate to 3% by the summer of 2024, according to an ING commentary.

The outlook follows the BoC’s recent decision to cut the overnight rate, a move that saw the Canadian dollar (CAD) trade slightly stronger amid market reassessments of the pace of future rate cuts.

“Essentially, we see the BoC cutting rates by 25 basis points at each meeting until next summer, when the policy rate is expected to drop to 3%,” ING said. The commentary noted that the moderate strengthening of the loonie came as some market participants expected signals of a more aggressive easing path, potentially including cuts of 50 basis points before the end of the year.

Despite this, ING sees limited potential for a sharp change in the CAD curve at this stage, with little indication that the BoC will deviate from its gradual easing trajectory. The central bank’s recent actions are driven by a complex economic context characterized by rising unemployment, moderate inflation and weak economic growth.

Looking ahead, ING suggests that the BoC is likely to continue its easing cycle in the next meetings in October and December. The outlook for CAD remains cautious, with the currency seen as a lower-risk, lower-reward option compared to its peers such as the Australian and New Zealand dollars.

Factors such as the upcoming US Federal Reserve meeting and US and Canadian jobs data are expected to have a more significant impact on the pair in the near term.

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