We are waiting for the Canadian interest rate decision today at 4:45 pm Egypt time, and it is expected to reduce interest rates by 25 basis points from the levels of 5% to 4.75%.
But the markets are pricing in about an 80% interest rate cut of 0.25% from the Bank of Canada today.
The Reuters poll included 29 forecasts, of which 22 predicted a reduction of 25 basis points, while the other seven forecasts saw no change, that is, an 80% reduction in June, The move is the first change since July 2023 and the first cut in interest rates since March 2020.
The danger is that the Bank of Canada does not cut interest rates this week, but waits until July.
The market is pricing in only about 57 basis points of cuts this year, including 20 basis points for this week's meeting.
While we expect a total of three cuts this year, cautious repricing may be limited this week if the Bank of Canada sends a cautious message about future interest rate cuts.
Officials from the Bank of Canada said that they want to see inflation fall for a longer period, to be more certain about the interest rate cut.
The logic that might explain the suspension of this week's meeting, if that's what we got, involves that while inflation is trading at a low level, that progress is less. Sustainable. Thus, banks can choose to wait for a rate cut until the July meeting.
For the Canadian dollar, any reduction in June will not be an obstacle, but the obstacle will be in the event of stabilization and no reduction.
