BOC Minutes: Members saw risk consumers could be significantly weaker in 2025 and 2026

• Spending in 2025 and 2026 could be hit by the number of households likely to be renewing their mortgages at higher rates
• Spending per person is expected to recover as rates declined but many households will still face significant debt-servicing costs
• Agreed to communicate that they would be weighing two-way inflation forecasts
• Saw less of a chance that pent-up demand would lead to a sudden rise in house prices as rates were cut
• Governing Council increasingly confident “ingredients for price stability are in place”
• Downside risks to inflation now as prominent as upside risks

• Economy in excess supply, slack emerging in labor market
• GDP growth subdued, consumption weak on per-capita basis
• Core and headline inflation within 1-3% range for several months
• Wage growth still elevated at ~4%, but expected to moderate
• Housing market imbalances persist, putting upward pressure on rents
• Future rate cuts likely if inflation continues easing as projected
• No predetermined path for policy rate – decisions to be made meeting-by-meeting
• BOC to continue balance sheet normalization by allowing maturing bonds to roll off
• Some expressed concerns that further weakness in jobs market could delay rebound in consumption

The BOC has shifted to easing mode with two 25 bps cuts, but remains cautious. Markets should watch for signs of persistent services inflation or weaker-than-expected consumption to gauge whether 50 bps will be on the table in September.

This article was written by Adam Button at www.forexlive.com.