‘The bearish case on the Canadian economy is fading’: How economists and market bets for rate cuts are reacting to Ottawa’s new fiscal stimulusPrime Minister Justin Trudeau’s suite of new fiscal spending measures aimed at helping to ease cost of living pressures have markets and some economists nearly ruling out a jumbo-sized rate cut by the Bank of Canada next month.
Overnight index swaps markets, which capture trading bets on future monetary policy moves, now suggest only about 10-per-cent odds of a 50-basis-point rate cut next month. That’s down from about 27-per-cent odds following Tuesday’s hotter-than-expected inflation report . So far, Bank of Montreal and Desjardins Securities have issued notes suggesting 50 basis points is nearly now off the table.Katherine Judge, senior and senior economist with CIBC Capital Markets, said the bank is still expecting a 50-basis-point cut in December. “The GDP and employment data coming up will be more important for the call,” she said in an e-mail to The Globe and Mail.
We’re assuming a good chunk of the stimulus cheques will be saved, but the GST/HST rebate will drive additional spending. BMO Economics is boosting Q1 GDP growth from 1.7% to 2.5%, with 2024Q4 and 2025Q2 seeing a smaller upward move, while Q3 was trimmed as the impact fades.
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