Central banks have been known to sugar-coat bad economic data, on the premise that overt pessimism might hurt confidence. The 4 March Bank of Canada (BoC) Statement following its 50bps policy rate cut made no such effort, in the opinion of the economists at Standard Chartered Bank, who are expecting two more rate cuts in 2020.
Key quotes
“We now think the BoC will cut the policy rate at least 50bps in the coming months, most likely via two 25bps cuts at the 15 April and 3 June meetings. “
Previously, we expected the BoC to cut once in Q1- 2020 and be on hold thereafter. We now see the policy rate at 0.75% at yearend 2020 (1.50% prior).
“Our pace of easing would still leave Canada’s policy rates above US rates; we may review our outlook if the Fed is more aggressive than we expect or the Canadian economy follows a steeper downward path than the BoC anticipates.”
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