MNI BoC Preview, Jul'24: A Back-To-Back Cut But Beware Betting On A Third

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.

PLEASE FIND THE FULL REPORT HERE:

BOCPreviewJul2024.pdf