Introduction to Interest Rate Cuts
The Bank of Canada (BoC) has recently cut interest rates, and economists are weighing in on what this means for the economy and future interest rate decisions. The cut is seen as a way to balance the risks to the economy and inflation.
Economic Outlook
Douglas Porter, Chief Economist and Managing Director of Economics at BMO Economics, states that "today’s rate cut better balances the risks to the economy and inflation." He believes that the Bank will cut rates two more times in the coming months, with cuts likely in December and March. However, the Bank has left its options open for the next meeting, focusing on a shorter-term horizon to determine the path for policy.
Expert Opinions
Other economists also share their thoughts on the interest rate cut. Andrew Hencic, Director and Senior Economist at TD Economics, notes that "officials have space to deliver another cut with core inflation metrics softening and the labour market showing visible strains." He expects the BoC to deliver another 25 basis points of easing at their next meeting in October.
Randall Bartlett, Deputy Chief Economist at Desjardins, agrees that the Bank will cut again in October, citing concerns about supply chain issues and a weaker job market. Taylor Schleich and Ethan Currie, Economists at the National Bank of Canada, also expect a follow-on cut in October, but note that the empirical record suggests that if the Bank cuts once, it will likely cut again.
Future Interest Rate Decisions
Andrew Grantham and Katherine Judge, Senior Economists at CIBC Capital Markets, believe that the economy is losing resilience and inflation will continue to be contained, leading to another 25bp cut at the next meeting in October. Clare Fan, Senior Economist at RBC Capital Markets, notes that the central bank has an unusual amount of flexibility in making monetary decisions, and additional easing is likely but not guaranteed.
Derek Holt, VP and Head of Capital Markets at Scotiabank, questions the forward bias of the interest rate cut, noting that it may signal a high bar to following up with another cut at the October 29th decision. He expects one more 25bps cut in Q4, but the exact timing will depend on data and developments.
Conclusion
In conclusion, the recent interest rate cut by the Bank of Canada has sparked a range of opinions from economists about the future of interest rates. While some expect another cut in October, others are more cautious, citing the need for more data and developments to inform their decisions. Ultimately, the path forward for interest rates will depend on the evolving economic landscape and the Bank’s response to new information.
