Bank of Canada remains on rate cut path – Commerzbank

As expected, the Bank of Canada (BoC) cut interest rates again yesterday by 25 basis points to 4.25%, notes Michael Pfister, FX strategist at Commerzbank.

The BoC will cut rates by 25bp at each of its two remaining meetings

“That means he has now cut rates in the last three meetings. At the same time, it was clear between the lines that further rate cuts were likely at future meetings. BoC Governor Tiff Macklem pointed out in his opening remarks that further interest rate cuts can be expected as long as inflation continues to moderate as expected. At the same time, the BoC now wants to see growth pick up.”

“The surprisingly strong growth figures in the second quarter did not change this, as they were mainly driven by government spending and investment, with little contribution from private consumption. In short, unless inflation picks up unexpectedly in the coming months, the BoC is likely to cut rates further. Our baseline scenario remains a rate cut of 25 basis points at each of the two remaining meetings this year.”