JPMorgan is inclined towards keeping the Bank of Canada on fixed interest rates, and these expectations are summarized in several points that support JPMorgan's position, namely the following:
Governor maklem has previously emphasized a gradual easing approach to avoid jeopardizing the progress in inflation. Recent data showing the return of the acceleration of core inflation and rising wages, despite some slowdown in the labor market, suggest the need for patience until next September.
1. the position of Governor maklem:
Governor maklem called for a gradual easing cycle to avoid a reversal of progress on inflation.
He takes a cautious approach to rapid cuts, which could lead to a very rapid reduction in interest rates and thus jeopardize the gains achieved in controlling inflation.
2-economic indicators:
- Core inflation: the 3-month annual growth of the Bank of Canada's preferred core inflation measures accelerated to the top of the target range since the June interest rate cut.
- Uncertainty: companies expressed more uncertainty about the inflation outlook in the second quarter.
- Wage growth: wages have been rising recently, despite some further decline in the labor market.
3. Market Forecast:
It was priced for a cut of 25 basis points this month, but economic evidence supports waiting until September.
4. comparison with the Fed:
The Bank of Canada may consider the gradual approach by the Fed as a key factor in making its decision.
In the end, JPMorgan is leaning towards keeping the Bank of Canada's interest rates steady at this meeting, despite market expectations of a cut. Governor maklem's preference for gradual easing, coupled with recent economic data, supports the case for patience until September.
