Canada, as the first G7 country to cut rates, is not alone in its monetary policy adjustments. The United States has also been contemplating rate cuts, albeit with a different trajectory. During their last meeting on March 20, U.S. officials projected three rate reductions in 2024, with expectations of the first cut potentially starting in June. However, due to persistent inflationary pressures, financial markets now anticipate just one rate reduction this year, slated for November, as indicated by futures prices tracked by CME FedWatch. This divergence in rate-cut expectations between Canada and the United States reflects distinct economic conditions and policy responses in both countries.
Canada Anticipated Further Rate Cuts Projected by CIBC:
According to Andrew Grantham, senior economist at CIBC, Canadians should brace for additional interest rate relief in the near future. Despite financial markets largely anticipating the recent cut to the overnight rate, Grantham notes that long-term rates and the Canadian dollar still reacted with declines, fueled by a perceived dovish tone from policymakers. Grantham predicts another 25 basis point reduction at the next meeting scheduled for July, with a total of four cuts expected by the year's end, including the most recent adjustment.
RSM Echoes Predictions of Further Easing:
Tu Nguyen, economist at RSM Canada, regards the recent rate cut by the Bank of Canada as a prudent move, given various economic indicators. Nguyen anticipates another cut in July, followed by three additional cuts by the close of 2024. Nguyen emphasizes that while a single rate reduction may not immediately stimulate economic recovery, it signifies the commencement of a gradual and orderly rate-cutting cycle. This approach, Nguyen asserts, lays the groundwork for recovery to gain momentum, potentially reaching full force by 2025.