• BoC cuts rates by 50bps, keeps door open to further moves
• Market fully prices in a 25bps rate cut in December
• Loonie remains under pressure against the dollar

The Bank of Canada confirmed market expectations by delivering a 50bps rate cut at today’s meeting. Despite certain market participants pointing to a smaller move on the back of decent jobs and growth figures, the recent weak inflation report and the bearish move in oil seem to have tipped the scale in favour of a more aggressive rate cut.

The overall tone of the statement, in particular the “if the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further” comment along with the quarterly projections, which have inflation at 2.2% yoy in 2025, point to further rate cuts. The market is fully pricing in another 25bps move in December, but obviously the size of this cut will depend on the outcome of the US presidential election and the November Fed gathering.

The loonie has been on the back foot, losing around 3% against the US dollar since late September, when the market started to price in a less aggressive easing path for the Fed. Today’s announcement and overall rhetoric are keeping the loonie under pressure, with the next target for the dollar/loonie bulls situated at the November 1, 2023 high at 1.3898, a tad below the August 5 high.