Bank of Canada Expected to Cut Rates in September Amid Economic Slowdown

Analysts have expressed their views that the Bank of Canada is likely to resume interest rate cuts in September. This prediction comes in the wake of the second quarter GDP contraction, which exceeded market expectations, and the lack of signs of economic recovery in the third quarter. The analysts believe that the Bank of Canada will implement more aggressive easing measures than what is currently priced into the market, despite recent market volatility.

Royce Mendes, an analyst, maintains his view that the Bank of Canada will resume interest rate cuts in September. This is based on the expectation that the second quarter GDP decline will be more severe than anticipated, and there are no signs of economic recovery in the third quarter. Mendes points out that as analysts who previously opposed rate cuts reassess their assumptions, and traders factor in more easing policies, Canadian government bond yields are steadily declining. He believes that even after the recent market fluctuations, the Bank of Canada's ultimate easing measures will be more aggressive than the current market pricing.

Andrew Grantham, another analyst, notes that due to the decline in exports, Canada's GDP growth rate has remained negative. The key takeaway from the latest data is that the economic momentum at the end of the second quarter and the beginning of the third quarter remains weak. He still expects the Bank of Canada to cut interest rates multiple times to accelerate economic recovery. Therefore, assuming there are no surprises in next week's employment data, he predicts that the first rate cut will be implemented in September.

The economic outlook for Canada continues to deteriorate, with analysts suggesting that the Bank of Canada may need to take more aggressive measures to support the economy. The central bank's actions will be closely watched as they navigate the challenges posed by the current economic environment.