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- CIBC now expects both the Fed and Bank of Canada to cut rates by 25bps at each of their next three meetings
- This represents a 25bp lower endpoint for rates in 2024 and 2025 compared to previous forecasts
- Disinflation appears entrenched, allowing central banks to focus on downside economic risks
- However, CIBC doesn't see an imminent recession despite recent softer US data
- They expect Q3 US growth to settle around 1.5%, noting Q2 was stronger than expected
- Rising unemployment tied more to labor force growth than economic weakness
- CIBC sees less reason for central banks to pause rate cuts to assess inflation progress
- But they don't expect aggressive 50bp cuts without "scarier economic news"
- For next week's US CPI, CIBC forecasts 0.2% m/m for both headline and core, in line with consensus
- They see US retail sales control group falling 0.2% m/m in July, below the +0.1% consensus
CIBC has moved towards a slightly more dovish outlook, but still expects a gradual easing cycle rather than aggressive cuts. They view recent data as supporting earlier cuts, but not signaling a dramatic economic downturn.
