Fed's uncertain path creates bind for Bank of Canada's Macklem
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The Bank of Canada is considering cutting interest rates, but the uncertainty of the U.S. Federal Reserve's path is creating a bind for Governor Tiff Macklem. While the Bank of Canada is open to easing rates as early as June, the Fed's plans for rate cuts are less certain. This raises questions about how deeply the Bank of Canada can lower rates and whether they will need to pause and wait for the Federal Reserve. The larger the gap between the two countries' policy interest rates, the greater the potential for downward pressure on the Canadian dollar. Economists are split on how much the two countries' policy rates can diverge comfortably, with some suggesting a maximum spread of 100 basis points and others suggesting 50 basis points. The Bank of Canada is closely watching currency moves as it weighs rate decisions. The bank is expected to have a soft landing for the economy, but the exact path of rate cuts is uncertain.

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https://www.bloomberg.com/news/articles/2024-04-19/fed-s-uncertain-path-creates-bind-for-bank-of-canada-s-macklem