USD/CAD: BOC cuts the policy 25bps to 2.75% – BBH

The Bank of Canada (BOC) delivered on expectations yesterday and cut the policy 25bps to 2.75%. The BOC warned that the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest, BBH FX analysts report. 

BOC to bring down the policy rate below neutral settings

"As such, unless the trade dispute is fully resolved, the BOC will likely bring down the policy rate below neutral settings which is a drag on CAD. The BOC’s neutral range estimate is between 2.25% to 3.25%. The April Monetary Policy Report will include an update to that estimate. Markets imply an additional 75bps of easing over the next 12 months and the policy rate to bottom at 2.00%."

"BOC Governor Tiff Macklem confirmed there was no consideration for a 50bps rate cut. Instead, Macklem’s opening statement stressed 'Governing Council will proceed carefully with any further changes to our policy rate given the need to assess both the upward pressures on inflation from higher costs and the downward pressures from weaker demand'."