Economy and Markets

The stronger-than-expected September U.S. payroll report left the economy on track for the historically elusive ‘soft landing’ and reduced urgency for the Fed to repeat a 50-basis point rate cut.

The Canadian economy has continued to underperform global peers with declines in per-capita output in seven of the last eight quarters.

Softening U.S. labour markets and lower inflation leave the Fed on track to kick of an easing cycle starting in September, one of the last major central banks to do so.

More central banks are committing to cutting interest rates from elevated levels.

We now expect the Fed to cut rates in September—earlier than our prior December assumption—with a gradual easing cycle to follow.

Bank of Canada and ECB both kickstarted the easing cycles in June but neither is expected to race rates to the bottom.

The global economic growth backdrop has shown signs of improvement, but Canada’s economy continues to underperform.

Upside inflation surprises year-to-date in the U.S. will keep the Fed on the sidelines for now – we continue to expect the first cut to the fed funds target in December, contingent on both growth and inflation gradually and persistently slowing.

A resilient U.S. economy and signs of reacceleration in inflation look likely to derail Fed plans to cut interest rates by 75 basis points this year – we now look for just one 25 basis point cut in December.

The Canadian economy is still slowing as the lagged impact of earlier interest rate increases materialize. Gross domestic product edged higher in Q4 2023 but once again not fast enough to keep up with surging population growth. Per-person output (a key indicator of household living standards) fell for a sixth straight quarter (by our count) […]

Resilience in the U.S. continues to buoy investors’ spirits. Conditions also look to have already bottomed out in the euro area and U.K. In Canada, things are much less upbeat.

How will the rest of this current rate cycle from the BoC compare with previous ones? In short, we expect more things to differ than to stay the same.