Research & Analysis
Bank of Canada Rate Decision and Market Impact
- 2024-09-03
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Rate Cut Expectations:
The Bank of Canada's expected decision involves either a 25 basis points cut to 4.25% or a more aggressive 50 basis points cut to 4.00% .
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Economic Indicators:
Factors driving these expectations include a decrease in inflation, The average CPI has slowed to 2.43%, and an increase in unemployment rates, which have risen throughout the year.
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Implications for CAD:
Higher mortgage renewal rates could lead to increased debt servicing costs for Canadian consumers, suggesting a bearish outlook for the Canadian dollar.
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Market Reactions:
- A 50bps Cut could lead to immediate selling of CAD, boosting currency pairs like USDCAD and encouraging selling of CADJPY.
- A 25bps Cut, if accompanied by signals of further rate cuts, might maintain pressure on CAD, though this outcome is largely anticipated.
- If the BoC Holds the rate, highlighting caution over rapid rate reductions, the CAD might strengthen sharply, encouraging USDCAD selling and signaling a surprise in the market.
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