Second big bank forecasts further rate cut

by Justin da Rosa06 Feb 2015
It’s been a whirlwind week following the Bank of Canada’s announced rate change and the industry could be in for even more disruption come March, according to a growing chorus of financial institutions predicting further cuts.
“The Bank of Canada assumed upcoming weakness in the economy when it cut rates last week. Although its focus is on 2015, with growth in Q4 now set to come under its 2.5% forecast, the BoC has all the more reason to cut again in March,” CIBC states in its Economic Flash report published Friday. “The downdraft from oil will indeed be significant, but overall output’s response to cheaper fuel, lower rates, and a significantly weaker Canadian dollar means that our full-year growth target for 2015 is still around the economy’s potential.”
The report comes on the heels of a similar prediction made by TD Bank, who also predicts a further rate cut to come from the Bank of Canada at its next rate announcement.
“The Bank of Canada unexpectedly cut the overnight rate by 25 basis points in mid-January, on the negative impact of lower oil prices on inflation and the real economy. At that time, it also signaled that it saw most of the risks to inflation to be tilted to the downside,” TD’s economic update, published last week states. “Given our weaker oil price, inflation, and output forecast relative to the Bank, it therefore holds that we expect some of those downside risks to be realized.
“As such, we forecast that the Bank of Canada will cut the overnight rate by an additional 25 basis points at its next fixed announcement date in March.”

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