Analysts See More Easing Ahead After Bank of Canada Cuts to 2.5%

Governor of the Bank of Canada Tiff Macklem, right, and Senior Deputy Governor Carolyn Rogers during a news conference following an interest rate announcement in Ottawa on Sept. 17. Photo by David Kawai /Bloomberg

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(Bloomberg) — The Bank of Canada cut its policy interest rate for the first time since March, matching the expectations of markets and many economists. With weak economic growth on the horizon and a tough outlook for job-seekers, several analysts believe the central bank isn’t done. 

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Governor Tiff Macklem said there was a clear consensus among the governing council for Wednesday’s cut, “suggesting that inflation fears have subsided on a fairly widespread basis,” said Karl Schamotta, chief market strategist with Corpay. Here’s what other economists and analysts had to say.

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Doug Porter, chief economist, Bank of Montreal

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“Today’s rate cut better balances the risks to the economy and inflation. The BOC left its options wide open on the next meeting, maintaining a focus on a shorter-term horizon than usual to determine the path for policy. For now, we will stick to our call that the Bank will cut two more times in coming months.”

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Katherine Judge, senior economist, CIBC

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“The economy is losing resilience and inflation will continue to be contained by the elevated unemployment rate and removal of retaliatory tariffs, and we therefore see another 25 basis-point cut in October.”

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Tony Stillo and Michael Davenport, Oxford Economics

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“We don’t think this is the beginning of a new cutting cycle that will see rates fall deeply into stimulative territory. We expect the BOC to cut by another 25 bps in October but then pause and hold rates at 2.25% — the low end of its neutral range estimate — through 2026. The BOC remains in a bind as it weighs the upside risks to inflation against the downside risks to growth from the trade war. Moreover, major fiscal stimulus is likely to be laid out in the federal budget this fall, which will do most of the heavy lifting to support the economy in the near term.”

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Geoff Phipps, portfolio manager, Picton Investments

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“The BOC’s lack of forward guidance and removal of a dovish statement from the July meeting increases the risk of a not-dovish-enough BOC. If the economy keeps softening — and that’s looking more like the base case — the BOC may need to lean more dovish in the months ahead.”

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—With assistance from Randy Thanthong-Knight.

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