The Bank of Canada lowered its key policy rate to 4.5% for the second time on Wednesday, July 24th, and economists remain confident in the future possibility of further cuts. The decision was widely expected by economists and the market. Economists noted Governor Tiff Macklem's dovish tone in the statement, and now expect at least two more cuts by the end of 2024. Here are their thoughts on the announcement: #Market Outlook for H2 2024#

A September rate cut "looks very likely" - Capital Economics

According to Stephen Brown, deputy chief economist of Capital Economics North America, the Bank of Canada's comments suggest that it will continue to cut interest rates if inflation continues to slow down.

"We have the same forecast for inflation this quarter as the central bank, which makes us think that another rate cut in September is the most likely outcome."

The economist added that this announcement was "not surprising" as the market had already set the probability of a rate cut at 90%.

Bank of Canada plans to keep cutting - CIBC

Although the Bank of Canada's rate cut did not surprise Avery Shenfeld, chief economist and director general of the Canadian Imperial Bank of Commerce's capital markets, its statement prompted him to adjust his forecasts for September and the rest of 2024.

Shenfeld had previously expected rates to remain unchanged in September and then cut in December, but now expects a rate cut in September.

"It's clearly a dovish central bank now seeking to ease rates and again push for growth, so another 50 basis points cut this year brings us completely in line with that view, with rates now expected to reach 2.75% by the end of 2025," he wrote in a statement.

"An easy decision" - Desjardins

Royce Mendes, director and senior macro strategist for Desjardins Credit Market, said the decision was "easy" and "not surprising," but the Bank of Canada needs to take more short-term measures to avoid further damage to the economy.

"As we have long argued, the Bank of Canada needs to significantly lower rates before the peak of mortgage renewals in early 2025 to avoid the risk of a recession," he said in a statement.

"Policymakers feel an urgent need to cut rates again in September. The dovish remarks released depict officials who are increasingly concerned about the possibility of a recession."

Mendes also adjusted his September forecast from unchanged to expected rate cut, with the next expected to remain unchanged in December.

A September rate cut "very likely" - BMO

Doulgas Porter, the chief economist of the Bank of Montreal, said that if the next consumer price index growth rate year-on-year is 0.2% or lower, another rate cut in September is "very likely."

"Today's comments from the Bank leave little doubt that it would take some serious convincing for it to not cut further," Porter said in a statement.

"We continue to expect two more rate cuts before the end of 2024, lowering the overnight rate to 4%, with the timing being driven by future data."