EconoFACTS

September 18, 2024 | 13:55

BoC Summary of Deliberations (September 4) — More Cuts to Come

Economist

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-econom... (Read more)

Benjamin Reitzes

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-econom... (Read more)

The Summary of Deliberations from the Bank of Canada's September 4 meeting didn't provide any new compelling information and were consistent with the tone from the policy statement and Governor Macklem's press conference. The risks highlighted were straightforward: 1) lower rates could juice growth, prompting slower cuts; or 2) growth stays soft or softens further and accelerates cuts.

The one meaningful takeaway is that some members of the Governing Council (GC) have "become more concerned with the downside risks to inflation, particularly if the economy and labour market weakened further." That was balanced with others on the GC who viewed the risks as balanced, as they're concerned about elevated shelter and services inflation. However, all member agreed that they want to see above potential growth in order to narrow the output gap so inflation doesn't slow too much.

And, as a surprise to no one, the minutes highlight the BoC's data dependence.

Key Takeaway: We've already seen one weak inflation reading, with one more CPI report and GDP out before the next BoC policy announcement. If GDP comes in soft, and it looks like the output gap could widen further, the dovish members look like they'd be leaning toward a 50 bp cut. It's just a question of whether the weaker data and those on the GC who are more concerned about downside risks can sway the more hawkish leaning members. Either way, the cuts will keep on coming.