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
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- 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:
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. Source