Big week for cuts and ANZ tweaks forecast

The Bank of Canada (BoC) was the first to go with a 25bps cut to bring its policy rate to 4.75%. The European Central Bank (ECB) followed suit, taking its main deposit rate to 3.75%.

For the BoC, inflation has fallen significantly and has remained below 3% for the past four months. Economic growth is also weak, and unemployment is steadily rising. The Eurozone faces a similar macro backdrop with services disinflation finally making good progress.

The data suggests the fight against inflation is slowly being won. Policy settings no longer need to be as restrictive.

The focus instead is centred on the future path of rates. And this is where the two central banks diverged. The BoC said it is “reasonable to expect further rate cuts”. Forward guidance from the ECB, however, suggested a meeting-by-meeting approach.