Canada: One more rate cut early next year - ING

In the view of the ING Bank analysts, “domestically, the Canadian economy looks in good shape. However, trade tensions and concerns regarding the vulnerability of the country to global demand and commodity prices mean we suspect the Bank of Canada will step in with one last rate cut in early 2020”.

Key Quotes:

“The Bank of Canada has been sounding relatively relaxed of late regarding the risks facing the economy. The press release from the December 4 policy meeting talked of “nascent evidence that the global economy is stabilizing”, with Canada’s growth likely to “edge higher over the next couple of years.”

Stuttering global demand and lingering trade uncertainty mean that Canadian business may become increasingly cautious on both domestic hiring and investment in early 2020.

The weakness in the jobs market may also translate into slower pay growth, softer consumer confidence and slower spending growth in the coming months – thereby raising a sense of nervousness over the outlook for the key “source of resilience” as described by the BoC.

Inflation, meanwhile, is broadly in line with the target and is not a constraint on BoC action and we feel they will step in and provide one more rate cut in early 2020.”