BoC Anticipated to Persist with Rate Cuts into 2024, According to ING

The Bank of Canada (BoC) is expected to continue its rate-cutting cycle into next year, potentially lowering the policy rate to 3% by summer 2024, as noted by ING’s commentary.

This projection follows the BoC’s recent reduction of the overnight rate, which has led to a modest appreciation of the Canadian dollar (CAD) as market participants reassess the pace of future rate cuts.

ING predicts that the BoC will implement 25 basis point cuts at each meeting until next summer, resulting in a target policy rate of 3%. The commentary also highlighted that the loonie’s gradual strengthening occurred even when some market observers anticipated a more assertive easing stance, which could have included 50 basis point cuts before the year’s end.

Despite this, ING sees limited possibilities for a hawkish shift in the CAD curve at this juncture, given that there are few signs the BoC will diverge from its current gradual easing path. The central bank’s decisions are influenced by a complex economic environment marked by rising unemployment, moderating inflation, and sluggish economic growth.

Looking forward, ING suggests that the BoC is likely to maintain its easing strategy during the upcoming meetings in October and December. The outlook for the CAD appears cautious, as it is viewed as a lower-risk, lower-reward option when compared to currencies like the Australian and New Zealand dollars.

Key factors such as the upcoming meeting of the U.S. Federal Reserve and employment data from both the U.S. and Canada are anticipated to have a more pronounced influence on the CAD in the near term.

This article was generated with AI assistance and reviewed by an editor.