As expected, the Bank of Canada (BoC) cut interest rates again yesterday by 25 basis points to 4.25%, Commerzbank’s FX strategist Michael Pfister notes.

BoC to cut rates by 25 b.p. at each of the two remaining meetings

“This means that it has now cut rates at the last three meetings. At the same time, it was clear between the lines that further rate cuts are likely at upcoming meetings. BoC Governor Tiff Macklem emphasised in his opening remarks that further rate cuts can be expected as long as inflation continues to moderate as expected. At the same time, the BoC now wants to see growth pick up.”

“The surprisingly strong growth figures in the second quarter did not change this, as they were mainly driven by government spending and investment, with little contribution from private consumption. In short, unless inflation picks up unexpectedly in the coming months, the BoC is likely to cut rates further. Our baseline scenario remains a rate cut of 25 basis points at each of the two remaining meetings this year.”