BoC to quickly return to a more neutral policy stance

There may have been some headline uncertainty going into this decision, but markets and economists were clearly leaning towards this outcome.

There may have beensomeheadline uncertainty going into this decision, but markets and economists were clearly leaning towards this outcome. It’s the right move in our view as it would have been difficult to justify continuing with the gradual approach in light of a softer inflation and growth backdrop, National Bank of Canada analyst notes. Neutral rate is between 2.25% and 3.

And to be clear, their updated economic projections do lookveryoptimistic to us.” “Should our forecast for a continued sluggish economy materialize, a follow-on 50 basis point rate cut in December should be viewed as the overwhelmingly likely outcome. On the other hand, if the economy were to break out of its underperformance funk and GDP growth picked up in line with the Bank’s projections, a return to 25 bp cuts could be justified.” “The Bank will continue to let the data do the deciding.

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