3 reasons the Bank of Canada will begin a cascade of rate cuts, first in June

Bank of America on the Canadian inflation report and the implications for the BoC: falling core clears the way for a June cut.

We expect the BoC to cut in June given that

• core inflation continues to trend down
• labor market is softening overall
• the economy continues to grow below potential

There is a risk of June being postponed to July:

• there are two inflation prints before the July meeting, which has a Monetary Policy Report

More

• the BoC can cut even if the Fed takes longer to cut
• baseline is 25bp consecutive cuts once the BoC gets going, so we expect the policy rate at 3.75% by end-2024 and 3.00% by end-2025
• risk is for fewer cuts as the BoC could cut at a slower pace than in our forecasts while it waits for the Fed to cut

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The data is here:

• Canada April CPI 2.7% versus 2.7% expected

USD/CAD update, the prospect of divergent policy weighing on CAD:

The BoC June meeting is on the 5th.

July is on the 24th.

This article was written by Eamonn Sheridan at www.forexlive.com.