BOC: MNI BoC Review-Sept 2025: Balancing Risks, Open To Cut Further (1/2)
Sep-17 17:26
We've just published our review of the September Bank of Canada meeting - Download Full Report Here
- The Bank of Canada resumed easing on September 17 after a 3-meeting hold, with a 25bp rate cut to the overnight rate to 2.50%. There was limited market reaction on net to the decision and press conference, with the BOC as expected keeping the door open to further easing as soon as the next meeting in October, but falling short of any firm guidance to that effect.
- The future path of rates repriced slightly to reflect the implemented cut (which had not quite been fully priced going into the meeting, reflecting a slightly hawkish move going into the release).
- While rate cut expectations diminished slightly early in the press conference after headlines reported Gov Macklem saying that they considered holding rates, this didn’t appear to be a signal as he was merely citing a formality (“I there was a clear consensus to cut our policy rate by 25 basis points. You know we as we have for the last couple of meetings, we considered two alternatives, hold the policy rate where we are, or cut the policy rate.”)
- Otherwise, attention was on whether the BOC would signal further cuts. July’s guidance suggesting that there may be a “need” to cut rates in future was removed, but overall the BOC maintained its easing bias.
- Macklem entertained press questions about what would trigger a further cut, and the overall communications highlighted risks to growth and employment alongside what the BOC sees as better-contained inflationary pressures than had been feared in the summer.
- He continually mentioned the need for a balanced approach to future rate-setting, moving meeting-by-meeting and keeping the next decision in October live.
- This was summed up by his comment: “what we can do is help the economy adjust while maintaining well-controlled inflation. That's what we're focused on... it's going to be about balancing those risks. If the risks tilt, if the risks shift, we're prepared to take action, and if the risks tilt further, we're prepared to take more action, but we're going to take it one meeting at a time. We are taking a shorter horizon. We're being a little less forward looking than usual, and we'll make that risk assessment in October when we get there."
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US DATA: Firms’ NPL Expectations Lowest Since 2022 – Dallas Fed Survey
Aug-18 17:18
- The Dallas Fed’s banking conditions survey showed loan volume and demand increased in August while credit tightening continued.
- It’s a regionally narrow look at credit conditions but with the survey being collected through Aug 5-13, it’s far timelier than the broader Federal Reserve SLOOS published two weeks ago for Q2.
- Loan demand sits towards the middle of the range for the past couple years, more subdued than strength seen in 2H24 in particular but avoiding the net declines seen in 2022 through early 2024. Credit standards meanwhile continue to tighten on net at a similar pace to the past year.
- The press release notes that “Across all loan types, loan performance deteriorated” but we’d point out that the net share expecting NPLs to increase over the next six months was its lowest since 2022 at 3%.
- That lends support to some recent stabilization in transition rates into delinquency in latest NY Fed data across most lending categories except for another sharp rise in student loan rates as data collection continues (see US DATA: Delinquency Rates Rise Again On Student Loans, Broadly Flat Elsewhere – Aug 5).
- Still, most of these delinquency transition rates were above pre-pandemic levels so the lack of a sharper increase in this Dallas Fed survey is at least encouraging.
US: American Support For Ukraine Increases
Aug-18 17:11
A slate of recent polls show that Americans are increasingly likely to support Ukraine, reversing a longer-term trend. A University of Maryland Critical Issues poll “found that support for Ukraine among the American public is at its highest since early 2023.”
- The survey report notes: “Americans remain overwhelmingly more sympathetic to Ukraine than to Russia, with a marked increase in sympathy Republicans feel toward Ukraine since March.”
- A Chicago Council on Global Affairs poll, taken shortly before the Trump-Putin summit in Alaska, found that the American public, “support for sending military and economic aid to Ukraine has increased since March—especially among Republican Party supporters. These changes in GOP opinion could reflect Trump’s recently shifting policies and rhetoric and Trump’s own growing frustration with Putin’s “tapping him along.”
- A Pew Research Center survey found that 50% of Americans now say the US has a duty to help Ukraine, with Republican support rising to 35% from a low of just over 20% in March.
Figure 1: Share of Americans who say the US has a Duty to support Ukraine
Source: Semafor, Pew Research Center
LOOK AHEAD: Tuesday Data Calendar: Fed VC Bowman Pushed Back
Aug-18 17:08
Note Fed VC Bowman interview on Bbg that was scheduled for this afternoon has been moved to Tuesday morning.
- US Data/Speaker Calendar (prior, estimate)
- 08/19 0830 Housing Starts (1.321M, 1.300M), MoM (4.6%, -1.6%)
- 08/19 0830 Building Permits (1.393M, 1.388M), MoM (-0.1%, -0.4%)
- 08/19 1000 Fed VC Bowman interview on Bbg TV
- 08/19 1130 US Tsy $85B 6W bill auction
- 08/19 1410 Fed VC Bowman blockchain symposium, WY
- Source: Bloomberg Finance L.P. / MNI
