Monthly Forecast Update

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.

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.

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.

Fed willingness to talk about interest rate cuts sent markets rallying to close out 2023.

A softening economic growth backdrop has left central banks in Canada, the Euro Area, and the U.K. on hold.

Elevated policy rates and tight financial condition continue to slow consumer spending in Canada, the euro area and the UK

Central banks are on pause as surging term bond yields tighten financial conditions further. Canadian population growth is complicating interpretation of macroeconomic data, but there are signs of softening under the surface.

The global economic backdrop is darkening as growth slows in China while elevated interest rates weigh on Canada

Robust economic data seemed to bring sunnier days in July. For the most part, global equity indices inched higher as recession fears eased.