Bank of Canada Rate-Cutting Cycle to Continue into 2024, ING Commentary Predicts
The Bank of Canada (BoC) is expected to continue cutting rates into next year, potentially bringing the policy rate down to 3% by the summer of 2024, according to a commentary by ING. The recent rate cut by the BoC has led to a slight strengthening of the Canadian dollar (CAD) as market expectations for future rate cuts are reassessed.
"We essentially see the BoC cutting rates 25 basis points at each meeting until next summer, with the policy rate expected to reach 3%," stated ING. The commentary highlighted that the moderate strengthening of the loonie came as some market participants were anticipating a more aggressive easing path, potentially including 50 basis point cuts before the end of the year.
Despite this, ING does not foresee a significant shift in the CAD curve towards a more hawkish stance at this time. The BoC is likely to continue its gradual easing trajectory due to economic factors such as rising unemployment, moderating inflation, and lackluster economic growth.
Looking ahead, ING predicts that the BoC will continue its easing cycle in the upcoming October and December meetings. The outlook for the CAD remains cautious, with the currency considered a lower-risk, lower-reward option compared to other currencies like the Australian and New Zealand dollars. Factors such as the upcoming U.S. Federal Reserve meeting and U.S. and Canadian jobs data are expected to have a significant impact on the currency pair in the near term.
In conclusion, investors should pay close attention to the Bank of Canada's rate-cutting cycle as it can have a direct impact on the value of the Canadian dollar. Understanding the economic factors driving these decisions can help individuals make informed decisions about their investments and financial strategies.