'Strong case' for another jumbo Bank of Canada rate cut, say economists

financialpost.com:

The Bank of Canada supersized its fourth consecutive interest rate cut to 50 basis points from the standard 25 basis points, bringing its benchmark lending rate below four per cent for the first time in two years.

Policymakers started cutting in June, when the rate stood at a more than two-decade high of five per cent.

Here’s what economists are saying about where the Bank of Canada goes from here.

“The weak economic backdrop means there is a strong case for the Bank of Canada to follow its larger 50-basis-point cut today … with another 50 basis point move at the next meeting in December,” Stephen Brown, assistant chief North America economist at Capital Economics Ltd., said in a note.

The central bank, in its statement accompanying the rate decision, said the economy is struggling on several fronts, from excess supply, as higher rates continue to tamp down consumer spending, to a softeninglabour market.

Brown thinks it’s “unlikely” Wednesday’s larger-than-usual cut is a “one-off” given that the Bank of Canada downgraded its forecast for third-quarter gross domestic product (GDP) to 1.5 per cent annualized in its updated Monetary Policy Report (MPR) from 2.8 per cent in the previous MPR.

For the fourth quarter, the Bank of Canada expects GDP of two per cent — “a modest pickup.”

Brown said policymakers are looking to bolster growth, but “nonetheless, the (central) bank does not seem confident that growth is on the cusp of accelerating strongly.”

He expects the policy rate will be cut to 3.25 per cent after the bank meets on Dec. 11, with a few more cuts in 2025 to arrive at a terminal rate of 2.25 per cent, “although the risks to that terminal rate forecast now seem to lie to the downside.”

The Bank of Canada has shifted