- Will the BoC deliver a single or double rate cut?
- BoC announces on Wednesday, at 14:45 GMT
- Loonie could probably be affected
One more rate cut before the year-end
On Wednesday, the Bank of Canada (BoC) will make its final interest rate decision for 2024. Financial markets and economists are widely anticipating another rate cut, with the consensus leaning toward a reduction of 50 basis points, bringing the policy rate down from 3.75% to 3.25%.
The BoC has already made significant cuts this year, including a 50-basis-point reduction in October. Several factors, including the latest job report that revealed weaker-than-expected employment growth, influence the decision to further cut rates. This has increased the likelihood of a more aggressive rate cut to support the economy.
Economic Outlook for 2024
Looking ahead to 2024, the BoC projects a gradual improvement in economic growth. The central bank’s October Monetary Policy Report forecasts GDP growth to pick up slowly, with inflation expected to remain around the 2% target. Core inflation is anticipated to decline gradually, reflecting easing price pressures in various sectors. The BoC’s outlook suggests that further rate cuts may be necessary to sustain economic momentum and achieve the BoC’s inflation target.
Several key factors are influencing the BoC’s decision-making process. Recent data shows that inflation has been relatively stable, but the Bank remains cautious about potential upward pressures. The labor market has shown signs of weakness, prompting concerns about economic growth. Policymakers are also considering the broader global economic environment, including the policies of other central banks like the Federal Reserve and the European Central Bank (ECB). Additionally, housing market trends, consumer spending, and business investment are all critical factors that the BoC monitors closely.
Impact on USD/CAD
The rate cut is likely to affect the dollar/loonie, potentially leading to a depreciation of the loonie. The pair reached the four-and-a-half-year high of 1.4176 early on Monday, endorsing the bullish outlook, with the next resistance coming from the April 2020 peak at 1.4265. Otherwise, a drop below the significant support line of the 20-day simple moving average (SMA) may show signs of a negative retracement until the 1.3980 and 1.3925 support levels.
 will make its final interest rate decision for 2024. Financial markets and economists are widely anticipating another rate cut, with the consensus leaning toward a reduction of 50 basis points, bringing the policy rate down from 3.75% to 3.25%.){kind=link}