The Bank of Canada has pivoted to easier monetary policy, but economists are split on how many more cuts to expect this year.

Officials trimmed borrowing costs by a quarter of a percentage point this week to 4.75 per cent. Governor Tiff Macklem said more cuts are likely if inflation progress continues, but he’ll take decisions “one meeting at a time.” That suggests policymakers aren’t on a set path for easing and will instead be data dependent.

There’s no predetermined course when one looks at economists’ forecasts, which are swayed not only by analysts’ views of Canada’s disinflation and growth, but also their perspective on how far the Bank of Canada can keep easing ahead of the U.S. Federal Reserve.

Traders in overnight swaps put the odds of another cut in July at less than two-thirds, with two full cuts priced by the bank’s December meeting, which would bring the benchmark overnight rate to 4.25 per cent. They expect the rate to reach 3.75 per cent by July 2025.

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Economists said they expect Macklem to cut rates to 3.5 per cent by the middle of 2025, according to Bloomberg’s most recent survey, which closed the week before the central bank cut rates on Wednesday.

In a news conference after the decision, Macklem waved off reporters’ questions about the end point for rates. When asked about whether policymakers planned to cut until they reached the neutral rate — the theoretical level of borrowing costs that neither restricts nor stimulates the economy — Macklem told reporters they were getting ahead of themselves.

“I don’t think Canadians should spend a lot of time thinking about the neutral rate,” he said, but added that interest rates aren’t likely to fall to pre-Covid-19 levels. 

In April, the Bank of Canada raised the midpoint estimate for the neutral rate, also known as r-star, to 2.75 per cent from 2.5 per cent previously.