BOE: Taylor: Expect Bank Rate to normalise close to 2.75%

• BOC HOPES TO RESTORE FORECAST IN JULY INSTEAD OF TWO SCENARIOS

Rep Mike Lawler (R-NY) warned in a statement on X that SALT Republicans could torpedo the 'Big Beautiful Bill' in the House, if the Senate changes the $40,000 State and Local Tax (SALT) deduction in the House-passed version of the bill. 

• Lawler said: "Let’s be clear — no SALT, no deal... If the Senate changes the negotiated number of $40,000 — it will derail final passage of the bill."
• Lawler's statement came in response to a comment from Senate Majority Leader John Thune (R-SD) on SALT: “There’s gonna have to be some adjustments. Senators just are in a very different places than the House is on that”.
• While there is a sizable contingent of blue-state Republicans in the House (enough to sink the bill), there are no Republican Senators from high-tax blue states who have the same political imperative to enact the SALT deduction. Many Republican senators view the SALT deduction as a red-state subsidy for blue states.
• Lawler's comment brings into sharp focus the problem for both Thune and House Speaker Mike Johnson (R-LA), who are both facing rebellions from their moderate and conservative flanks over the shape of the final reconciliation package.
• Senate Finance Committee Republicans are scheduled to meet with President Donald Trump at the White House at 16:00 ET 21:00 BST to discuss disputes over the tax policies in the bill. Trump has previously backed a higher SALT cap but is under pressure from conservatives to endorse more deficit reduction measures.    

Asked about how the economy is playing out relative to the two forecast scenarios in the April MPR, Gov Macklem says: 

• "We're somewhere between the two scenarios, but it's still a moving target. And you know, we'll we'll have to see where things go....since April, the likelihood of scenario two, which is a pretty extreme, protracted, severe trade war - the likelihood of that does appear to have come down somewhat... I hope the situation becomes clear and we can go back to a more usual forecast, or at least a central scenario with with some some risks, but that's really going to depend on on how things play out."
• A little more commentary than usual on CAD in the BOC press conference. Macklem says re FX impact on goods imports inflation: "some of that [previous] depreciation may also be coming through the goods prices we're seeing now, because it takes some time for that to get passed through. As [Deputy Gov Rogers] suggested, that's now going to - if the assuming the dollar stays 70 to 73 cents - that'll start to work in the other direction."
• Asked if consistent uncertainty tilts the BOC toward a rate cut, Macklem says: "when the Governing Council deliberated about the future path for interest rates on balance, different members had somewhat different perspectives. It's not surprising, particularly given the uncertainty, there's going to be some diversity of views about how things are going to play out and what that means. But on balance, Governing Council thought that if this uncertainty continued, if US tariffs continued, and that continued to weaken the Canadian economy, and if the cost pressures coming through on inflation were contained, yeah, there could be a need for a further reduction in our policy interest rate."