Bank of Canada Governor Tiff Macklem
RBC continues to expect the Bank of Canada to cut rates by 25 basis points on September 4 and again on October 23. The market sees a very small chance of a 50 basis point rate cut at one of these meetings, but this forecast is generally in line with what is expected.
The highlight of the week ahead is Tuesday’s Canadian CPI report, but RBC notes that the level of turnaround from the BoC is high, given that Macklem noted “the potential for setbacks along the way.”
- The CPI in July is expected to remain at 2.7% y/y, and the core at 2.9% y/y.
- Shelter costs remain the main driver, but are slowing due to lower mortgage rates.
- The Bank of Canada’s preferred core measures are likely to rise on a monthly basis.
- Economic weakness points to further easing of inflation
“There were concerns that the Bank of Canada’s initial rate cuts could reignite the rapid growth in house prices, but the response in housing markets to the 25 basis point cuts in June and July has been muted with signs that rental price growth is also starting to slow.”
All eyes are on the housing sector, and recent data shows that listings for sale continue to rise faster than sales.
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