August 11, 2024 at 06:38PM
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.
This article was written by Adam Button at www.forexlive.com.