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Pros Predict a 1/4% Drop in Rates on Tuesday

interest-rates-2 Canada’s economic picture has become less robust is recent days.  In turn, every one of Canada’s 12 primary securities dealers is now predicting a 1/4% rate cut at the Bank of Canada’s Tuesday meeting.

What happens after Tuesday is the bigger question.  Overall, most analysts expect the BoC to hold pat until at least September. 

BMO economist Sal Guatieri says, “Given that credit concerns are waning in Canada, there’s less need for the Bank of Canada to cut rates further” after its June 10 meeting.

BMO economist Doug Porter agrees, speculating that the probability of further rate cuts is “nearing an end.”  Porter says, “Between higher than expected CPI inflation, soaring oil prices, strong wages and a job market that isn’t falling apart, the Bank is unlikely to cut rates much further.”

CIBC economist Jeff Rubin is actually calling for “a minimum of (one percentage point) of tightening next year as Canadian inflation rates double.”  But not everyone is on that boat.  TD is on the other end of the spectrum, projecting two more rate cuts by year’s end.

If most forecasters are right, however, Tuesday will be the last BoC cut for a while.