STIR: Sept BOC Cut Implied At Above 50% After GDP; Next Week's Jobs Data Key
Aug-29 13:54
The sizeable miss in Q2 GDP (-1.6% Q/Q annualized vs -0.7% consensus, with downward revision to prior and a miss on monthly June GDP) has reignited September BOC rate cut potential, moving to better than 50/50 (~58%) for a 50bp cut per OIS, vs around 44% coming into the session.
- While there is only one full cut priced for the cycle - same as before - that's not cumulatively priced by December, vs January prior to GDP.
- And markets now see around 35bp of total easing to Q2 2026, vs around 30bp prior.
- Note that the three key releases since the July BOC have all shifted rate markets in a dovish direction, the others being the July Labour Force Survey and July CPI.
- The next major flash point is next Friday's Labour Force survey for August which - if it continues to show signs of weakness continuing from July (no consensus yet) would surely tip the balance more closely to fully pricing a September BOC Cut.
- Note also that the last major piece of data before the BOC decision announcement on Sept 17 is the August CPI report, but that only comes out on Sept 16, meaning it may not have much bearing on deliberations that will be effectively concluded by that point.
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BOC: Instant Answers For BOC Rate Decision
Jul-30 13:45
Following are the Instant Answers for the Bank of Canada interest-rate decision:
- Overnight Rate Target (2.75%, unchanged, as expected)
- Does the Bank signal it is prepared to LOWER rates in the future? Yes
- Does the Bank reiterate it could LOWER rates if the economy weakens amid tariffs and inflation is contained? No
- Does the Bank signal it is prepared to RAISE rates in the future? No
- Does the Bank signal it intends to leave rates on hold? Not answered
BOC HOLDS 2.75% RATE, MAY CUT IF GROWTH AND INFLATION SLOW
Jul-30 13:45
- BOC HOLDS 2.75% RATE, MAY CUT IF GROWTH AND INFLATION SLOW
- BOC SAYS CAD STRENGTH IS HELPING TO TRIM IMPORT COSTS
- BOC PRESENTS THREE ECONOMIC SCENARIOS AMID TARIFFS
- BOC: LACK OF FORECAST DOESN'T IMPEDE ABILITY TO TAKE DECISIONS
- BOC SAYS UNDERLYING INFLATION HAS QUICKENED TO AROUND 2.5%
- BOC CENTRAL SCENARIO HAS Q2 GDP -1.5% ANNUALIZED, Q3 +1.0%
- BOC CENTRAL SCENARIO SHOWS CORE CPI +3.1% IN Q2, Q3 AND Q4
BOC: Holds 2.75% Rate, May Cut If Inflation And Growth Slow Amid Tariffs
Jul-30 13:45
- Bank of Canada holds 2.75% rate for third time in a row as expected by all economists.
- BOC decision says could cut "if a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained." At the prior meeting the Governor's press statement said could cut if the economy weakens and "cost pressures on inflation are contained."
- BOC says Canada economy showing some resilience even amid US tariffs.
- Due to trade uncertainty the Bank gave three economic scenarios-- current tariffs, escalation and de-escalation.
- Current tariff scenario shows Q2 annualized GDP will be -1.5%, and Q3 +1%. Core inflation in Q3 and Q4 seen at 3.1%.
- "The lack of a conventional forecast does not impede our ability to take monetary policy decisions. But the unusual degree of uncertainty does mean we have to put more weight on the risks, look over a shorter horizon than usual, and be ready to respond to new information," Governor Macklem said Wednesday.
- BOC says underlying inflation accelerated to around 2.5% recently from about 2% in H2 last year with shelter costs the biggest driver.
- BOC says CAD appreciation lowering import costs.
- "We need to proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases from tariffs and trade disruptions are passed on to consumer prices; and how inflation expectations evolve," Macklem said.
