JPMorgan, CIBC See Bank of Canada Cutting Rates as Trade Weighs
JPMorgan, CIBC See Bank of Canada Cutting Rates as Trade Weighs
(Bloomberg) -- Canada may have just printed its lowest unemployment rate since at least 1976, but two big North American banks are now forecasting its central bank to cut rates.
JPMorgan Chase & Co. reduced its forecast for Canadian growth in the third and fourth quarters of this year to 1.5% from 2.25% and expects the Bank of Canada to cut rates at its October announcement. The New York-based bank had previously expected an acceleration in Canadian growth for the second half of 2019.
“We doubt that this upswing can be sustained amid the recent re-escalation of trade policy tensions, renewed declines in oil prices, and signs of slowing U.S. growth,” Jesse Edgerton, a JPMorgan analyst, said in a note.
Canadian Imperial Bank of Commerce expects the Bank of Canada to “reluctantly” join the rate-cutting party in the second quarter of 2020, following reductions from the U.S. Federal Reserve in the fourth quarter of 2019 and the first quarter of next year.
“While the Bank of Canada isn’t intrinsically tied to Fed policy, soft global growth means there’s even less reason to believe exports and associated business investment will be able to make up for slowdowns in other parts of the economy,” strategists led by Ian Pollick said in a note.
The Bank of Canada is expected to hold rates steady at 1.75% through the rest of the year, according to the median forecast of analysts surveyed by Bloomberg.
On Friday, Canada reported it added 27,700 jobs in May while the unemployment rate fell to 5.4%, the lowest in data going back to 1976. That brought job gains in the past 12 months to 453,100. The data added to evidence of a rebound from a stall at the end of the year, though trade tensions and a slide in oil prices may start to weigh.
--With assistance from Esteban Duarte.
To contact the reporter on this story: Jacqueline Thorpe in Toronto at jthorpe23@bloomberg.net
To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Steven Frank, Chris Fournier
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