The Bank of Canada (BoC) is widely expected to implement a 50 basis point cut to its policy rate during Wednesday’s meeting, marking the fourth consecutive reduction, which would lower the benchmark rate to 3.75%. The Canadian Dollar (CAD) has struggled against the US Dollar (USD), reaching a near two-year high of 1.3950 in early August before declining to the mid-1.3800s.
In September, Canada’s annual inflation rate fell below the BoC’s 2% target for the first time since the pandemic, registering a 1.6% increase over the past year. The BoC’s core CPI remains significantly below its target range of 1%-3%. Market forecasts indicate a 70% chance of a half-point cut, influenced by weakening demand and economic conditions, as reported in a BoC survey.
BoC Governor Tiff Macklem has suggested that further cuts are plausible, emphasizing the goal of achieving a stable inflation rate. Analysts from Standard Chartered anticipate additional 50 basis point cuts in the upcoming meetings, predicting a year-end rate of 3.25%. The BoC’s policy announcement is set for 13:45 GMT, with potential market reactions anticipated based more on the messaging than the decision itself. As USD/CAD continues to trend upwards, analysts highlight targets near 1.3946, emphasizing the influence of a recovering USD.
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