A host of economic releases and central bank communications have economists and markets pushing back the timing of interest rate cuts. National Bank of Canada’s forecast revisions respond to these same cues.

Patience and prudence pay off

While we never endorsed a March FOMC rate cut, the ongoing resilience of the US economy – combined with the most recent setback on the road to price stability – suggests Chair Powell & Co. could be in even less of a hurry to ease. True, the Fed is at least willing to discuss lower rates and most (all?) FOMC members believe less-restrictive policy will be appropriate before the year is out. But we now see July as a more likely timeframe for the first FOMC cut, the proverbial policy pivot pushed back one meeting vs. our prior forecast.

In starting later, we view it likely that cumulative policy rate relief will be on the order of 100 bps in the second half of this year, surpassing the median amount of easing implied by December’s ‘dot plot’ but less forceful than our prior thinking. Notwithstanding a non-trivial upgrade to our US growth forecast, distinctly sub-potential growth and a rising incidence of joblessness would make an argument for additional easing into 2025.