Bank of Canada rate cuts still likely next year

The Bank of Canada's intention to hold its policy rate at 1% for the time being does not rule out interest rate cuts early next year. External headwinds are likely to blow even harder next year and Canada’s domestic economy is poised to grow more slowly as housing weakens. Given that underlying inflation is already close to target and is set to ease further, we think more policy stimulus is the more likely scenario, possibly both monetary and fiscal. As such, we still believe the Bank will cut interest rates around the middle of next year, from 1.00% to 0.50%.