BoC set to keep it loose - ING

Economists at ING are not expecting the Bank of Canada (BoC) to follow the Fed with rate cuts just yet. 

• "The latest jobs report showed employment creation was essentially in the public sector with private-sector jobs falling 21,000. The Ivey Purchasing Managers’ Index fell into contraction territory while retail sales surprisingly fell 0.1%MoM in August versus expectations of a decent 0.4% gain.
• Moreover, the global growth story is looking less positive with evidence spreading of a deceleration in US growth at a time when Europe’s economy is stagnant and Asia's is softening. Canada is heavily exposed to these external threats given the Canadian economy is relatively open with trade accounting for more than 30% of economic activity versus little more than 10% for the US. Canada is also more dependent on commodities with mineral extraction and agriculture, representing more than 10% of the economy.
• As such, we think the likelihood of a Canadian interest rate cut is greater than that implied by market pricing. After all, the BoC has a tendency to move swiftly after signalling a shift in thinking. Remeber back in 2015 when the BoC rapidly changed its tune and cut rates in response to plunging oil prices and the fears for what it might mean for the broader economy? Recall, too, 2017, when it surprised with a September hike after already increasing rates in July. Swift, but modest action seems to be the BoC's mantra. We continue to see a decent chance of a surprise December BoC rate cut."