Further explanation of this week events
Before the headline employment numbers, US JOLTs Job Openings will be released on Wednesday, and the ADP non-farm employment change and weekly unemployment claims will be released on Thursday. We also get the Institute for Supply Management (ISM) data for August for manufacturing (Tuesday) and services (Thursday).
BoC: Third rate cut?
The BoC claims a portion of the limelight on Wednesday this week, scheduled to deliver an update at 1:45 pm GMT. As of writing, -29 basis points of easing is priced in for this announcement, meaning investors are anticipating another 25 basis point rate cut, bringing the Overnight Policy Rate to 4.25% and marking a third successive rate cut for the central bank. For the year, investors expect another two rate cuts following this, with a 25 basis point reduction at October and November’s meetings. And the economic landscape in Canada appears to justify rate cuts.
The year-on-year CPI inflation (Consumer Price Index) eased to its lowest levels since early 2021 at +2.5% in July (2024), down from +2.7% in June, remaining within the BoC’s inflation band of 1-3%. The BoC’s preferred measures of inflation, ‘CPI Median’ and ‘CPI Trim’, also pulled back to +2.4% and +2.7%, respectively, bringing the average of the two measures to +2.55%, down from +2.75%. At the July meeting, BoC Governor Tiff Macklem communicated that if further progress on disinflation is observed, it is ‘reasonable to expect further cuts in the policy interest rate’.
Regarding the labour market, unemployment remained at 6.4% for a second consecutive month in July (2024), unchanged from early 2022 peaks. Employment growth also fell by -2,800 in July, following a marginal fall of -1,400 in June. However, Statistics Canada noted: ‘Full-time positions saw an increase of 62K workers, while part-time jobs dropped by 64K’.