BoC expects rate cuts to continue through 2024, ING says By Investing.com

The Bank of Canada (BoC) is on track to continue its rate-cutting cycle next year, potentially cutting its policy rate to 3% by summer 2024, according to a commentary from ING.

The outlook is based on the BoC’s recent decision to cut overnight rates, which has seen the Canadian dollar (CAD) strengthen slightly as the market reassesses the pace of future rate cuts.

“We essentially see the BoC cutting rates by 25 basis points at every meeting until next summer, by which time the policy rate is expected to be 3%,” ING said. The commentary noted that the moderate strengthening in the loonie came as some market participants had expected signals of a more aggressive path of easing, possibly including 50 basis point cuts before the end of the year.

Nevertheless, ING sees limited potential for a hawkish shift in the CAD curve at this point, with little evidence that the BoC will deviate from its gradual easing path. The central bank’s recent actions are driven by a complex economic backdrop of rising unemployment, moderating inflation and subdued economic growth.

Looking ahead, ING suggests that the BoC is likely to continue its easing cycle in the upcoming meetings in October and December. The outlook for the CAD remains cautious, with the currency seen as a lower-risk, lower-reward option compared to peers such as the Australian and New Zealand dollars.

Factors such as the upcoming US Federal Reserve meeting and US and Canadian employment figures are expected to have a greater impact on the economy in the near term.

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