As the weather heats up, so does the buzz around a potential rate cut from the Bank of Canada. Everyone’s wondering: will the BoC finally give us some relief? 

It’s no secret that a rate cut is on the horizon, but the million-dollar question is: when and by how much? 

The Bank is laser-focused on bringing inflation under control, and they’ve been crystal clear—they won’t slash rates until they’re confident they’ll hit their 2.00% inflation target.

The latest inflation report, released on May 21st, 2024, hit the nail on the head with economists’ expectations. The annual inflation rate dropped from 2.90% to 2.70% in April, marking the fourth straight month of decline and hitting a three-year low. This trend is exactly what the experts were hoping for, which ups the ante for a rate cut on June 5th—the next scheduled announcement from the Bank of Canada—just two weeks away.

So, what are the odds we’ll see a rate cut on this date? 

Economists are split down the middle, making the chances of a rate cut on June 5th a little better than 50/50. 

 

Quotes from Big Six Economists Following Yesterday’s Inflation Report (May 21st, 2024)

CIBC Economics

“Today’s data should have provided the all clear on the inflation front that the Bank of Canada needed to start cutting interest rates in June.” ~Andrew Grantham, senior economist –  Full report

 

BMO Capital Markets 

“We believe that the door is open for a BoC rate cut, and have been leaning to June move for the past six months”. ~Douglas Porter, Chief Economist – Full report 

 

Scotiabank Economics 

“I still think the BoC should wait past June. Our best odds remain on a Q3 cut with July the most probable and 75 bps of cuts this year.” ~ Derek Holt, VP and head of Capital Markets Economics  – Full report 

 

TD Economics 

“The BoC’s preferred inflation gauges moved into the 1-3% target range for the first time in nearly three years. However, at 2.8% it is still close to the top of the BoC’s range, and we expect the bank will want to see a bit more confirmation before taking rates lower and lean towards a July cut. 

However, markets have found today’s inflation number at bit more reassuring and have increased the odds of a June cut to better than 50/50.” ~Leslie Preston, Managing Director & Senior Economist – Full report 

 

RBC Economics 

“The case for interest rate cuts from the Bank of Canada continues to build, with today’s report in line with our own base case for a first cut in June.” ~Abbey Xu, Economist –Full report

 

National Bank of Canada, Financial Markets 

“Money Markets have now increased their best for a rate cut on June 5th to almost a coin toss from 39% before the data came out”.  Full report

Overall, the big six are forecasting cuts of 0.75% to 1.00% by the end of 2024, with another 1.00% to 1.50% cuts in 2025. Further cuts are then expected into 2026. 

Keep in mind that forecasts are far from carved in stone. They are educated predictions based on information available to them today. They can and do change as new information is released. But the closer we are to the forecasted dates, the better the odds that they’ll be accurate… much like a weather forecast. But just like a weather forecast, then can be wrong. 

 

Conclusion 

I’ve been saying for a while that I would be surprised if the BoC cut their rate in June. But now it’s looking like we’re back to a coin flip. With such mixed forecasts, it comes down to which economist you listen to. But regardless, we’re getting close! If we don’t see a cut on June 5th, then chances are strong that we’ll see one in July.  

Stay tuned as we get closer to the big day–things are about to get interesting!