The Canadian housing market is struggling and the economy was flat in June and July.
The market is fully priced for a 25 bps cut at the Oct 23 meeting with virtually no chance of 50 bps but that could swing with some softer data. For the subsequent meeting, there is 61 bps priced in, which shows a good chance of at least one 50 bps cut this year.
Looking out to the end of 2025, the market is pricing in an overnight rate of 2.25% but with Canadian 5s yielding 2.78%, I'd have to assume some downside risks are being priced into the economy, and I think that's the right call.
Canada 5 year yields
Macklem is hosting a press conference. Watch here:
