BMO now expects six-straight quarter-point cuts from the Bank of Canada, until the policy rate reaches 1.5% in October

The Bank of Canada’s rate cut last week was partly portrayed as a risk management move compelled by the rising risk of U.S. tariffs. With that risk now being realized, we reckon the Bank will lean against the expected significant economic slowdown and steeply escalating risk of recession along with associated disinflationary pressures. However, there will be a measure of caution in the policy easing, with inflationary pressures simultaneously prodded by retaliatory tariffs and Canadian dollar depreciation. Previously, we projected the Bank would cut the policy rate two more times this cycle, by 25 bps in April and July (ending at 2.50%). We now look for the quarter-point pace to continue each meeting until October, thus ending at 1.50%. The net risk is that we get to the endpoint sooner.