Bank Of Canada Done Cutting Rates At Least Until 2027

Economic

Central Bank

Summary:

The Bank of Canada will hold its overnight rate on December 10, according to all economists polled by Reuters, a majority of whom predicted steady rates at least until 2027.With inflation easing and firmly within the central bank's target range and the economy growing at a robust pace, the need for further rate cuts has reduced significantly.Canadian home sales also regained momentum in October, suggesting low borrowing costs are helping the interest-rate-sensitive housing market, though further help from the central bank will be limited.

The Bank of Canada will hold its overnight rate on December 10, according to all economists polled by Reuters, a majority of whom predicted steady rates at least until 2027.

With inflation easing and firmly within the central bank's target range and the economy growing at a robust pace, the need for further rate cuts has reduced significantly.Canadian home sales also regained momentum in October, suggesting low borroing costs are helping the interest-rate-sensitive housing market, though further help from the central bank will be limited.

The BoC will keep the rate steady at 2.25% next week, according to all 33 economists in the December 2-5 Reuters poll, in line with market pricing.

After delivering 275 basis points of rate cuts, one of the most aggressive among G10 economies, the central bank signaled a halt in rate cuts in October, citing stable inflation.

"With the Bank (BoC) all but signalling that it believes it is done cutting rates, it's only natural that thoughts are now turning to when it may start going in the other direction," said Douglas Porter, chief economist at BMO Capital Markets.

"Given that the dark cloud of trade uncertainty is still hanging over the economy, and likely will continue to do so through much of 2026, we believe it's far too early for rate-hike talk."

A majority of economists, 18 of 29, predicted the BoC will hold rates steady at least until 2027.

That stable rate outlook partly hinges on an economy that has shown resilience in the face of U.S. tariffs, expanding at a better-than-expected 2.6% last quarter, boosted in part by government spending.

Low rates to boost housing

Despite massive rate cuts from the BoC, the housing market has broadly struggled this year with home prices declining around 3.2% so far.

But that fall is likely to stall soon, with prices forecast to rise 1.8% and 3.5% on average next year and in 2027, respectively, according to medians from a separate Reuters survey of 14 analysts.

Nine of 11 analysts in that poll said affordability for first-time homebuyers will also improve over the coming year.

"The BoC's interest rate cuts in September and October further improved affordability for buyers, lowering ownership costs at a time when home values have moderated in parts of the country in the past year," noted Robert Hogue, assistant chief economist at RBC.

"Rate reductions will likely draw more buyers to the market, unlocking some pent-up demand accumulated during the period of elevated borrowing costs."

The latest federal budget, Mark Carney's first as prime minister, proposed a total investment of C$280 billion, which includes C$25 billion in housing, over the next five years.

A strong majority of analysts, 8 of 10, who answered an additional question said the government initiatives in the recent budget to help build more homes and alleviate housing supply issues were a step in the right direction.

While two said they were nowhere near enough, none chose "helpful" or "very helpful".

"It is helpful to see a commitment by governments to take funding social housing seriously, though the quantum of funding so far is weak," said Peter Norman, chief economist at Altus Group.

"The 2025 budget will do little to assist in improving the currently stressed economics of improving new market housing supply in the major markets."

Source: Kitco

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Adam

Stocks

Equity traders looking for signs that a blistering stock-market advance is set to continue may take their cue from the companies that move goods across America’s roads, rails and waterways.

The Dow Jones Transportation Average has gained for nine consecutive days, a winning streak seen just five other times this century. It blew past a resistance level where gains have stalled over the past yea.

Truckers, shippers, airline and railroad companies carry goods and services that stock the US economy, and a breakout in their share prices soothes nerves of investors worried that growth will eventually sour. That’s also good news for adherents to the Dow Theory, which argues that transport and industrial averages must “confirm” each other’s moves for rallies to be durable.

“If the Dow Jones Industrial Average is climbing, that’s fine, but if the Dow Jones Transportation Average confirms the move, that means something deeper: companies aren’t just producing, they are delivering,” wrote Mark Malek, chief investment officer at Siebert Financial. “When both march higher together, it means economic reality is aligning with market optimism.”

Century-Old Dow Theory Flashes Bullish Sign for US Equity Rally_1

The rally in transportation stocks comes as investors brace for a Federal Reserve interest-rate decision next week, where a cut is widely expected. It’s also coincided with nascent signs of a rotation out of technology high-flyers and and into smaller economically-sensitive names.

Expeditors International of Washington Inc., Southwest Airlines Co. and Delta Air Lines Inc. each gained more than 10% last month. By contrast, Nvidia Corp. lost 13% during that time.

Earlier: Before the Bell: Record High in Sight as Rally Broadens

“The transport rally has bigger implications for rallies in the equal-weighted S&P,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “We believe that the rotation we have seen since last month out of the AI themed ecosystem names will continue.”

Industry-specific factors support investor outlook around the group as well. New mandates around Commercial Driver’s Licenses and English speaking proficiency tests have threatened to reduce the number of drivers in the trucking market by keeping those who are not proficient in English off the roads. To Lee Klaskow, Bloomberg Intelligence’s senior freight transportation and logistics analyst, it means that supply will tighten and freight rates will move higher in the long run.

Whatever the reason behind the recent breakout in transportations stocks, it’s a bullish signal for the broader stock market, according to Michael Kantrowitz, chief investment strategist at Piper Sandler & Co.

“Nothing would be a clearer sign of the market broadening out than seeing transportation stocks outperform,” Kantrowitz said. “They’ve seen persistent underperformance during the past three years of a bifurcated economy.”

Source: Bloomberg

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Devin

Central Bank

We expect the Fed to cut its policy rate target by 25bp to 3.50-3.75% next week, in line with consensus and market pricing. We expect an equal reduction to all administered rates, but an additional 5bp cut to the IORB rate is not off the table.
The Fed could also follow up on its October decision to end QT by announcing the start of organic balance sheet expansion in 2026, which would ease USD liquidity conditions further.
We expect Powell to verbally push back against continuation of sequential rate cuts in early 2026. Updated dots will likely signal a range of views for 2026 rates outlook, but we expect median long-range dot to remain at 3.00-3.25%.
Hawkish forward guidance could push UST yields higher and EUR/USD lower on Wednesday, but we maintain our upward sloping 12M EUR/USD forecast at 1.22.

Markets are pricing next week's 25bp cut to the policy rate target as largely a done deal, but 2026 outlook for both rates and liquidity remains a lot less clear. We expect Powell to push back on expectations of sequential rate cuts continuing in early 2026, echoing the message heard in October and reflecting the widely varying views within the FOMC. Knowingly delivering a 'hawkish cut' is a consensus choice.

Even though incoming macro data has not delivered decisive signals since October, we believe that the decline seen in markets' inflation expectations makes another rate cut more palatable even for the hawks (chart 1). Overall financial conditions have tightened modestly as real short rates have moved higher.

Jeffrey Schmid is likely to repeat his dissent in favour of a hold and could potentially be joined by Susan Collins and/or Alberto Musalem. Chicago Fed's Austan Goolsbee also prepared markets in November by saying he sees 'nothing wrong with dissenting'. On the other side, Trump-nominated governors Waller, Bowman and Miran together with NY Fed's John Williams form the backbone of the dovish camp.

We see a good chance of the Fed pausing its easing cycle in January, as three of the four new 2026 voters – Hammack, Kashkari and Logan – have all vocally opposed the October decision to cut. In our base case, we expect final 25bp cuts in March and June. The updated dots are likely to reflect the growing diversity of views even by the end of 2026. Macroeconomic forecasts will see more cosmetic changes; we expect a small positive revision to 2026 GDP forecast while inflation outlook will likely remain mostly unchanged.

The Fed formally ended its balance sheet drawdown at the start of December, but liquidity conditions remain on the tighter side. The effective Fed Funds rate has risen modestly within the target range, and SOFR traded above the upper bound around month-end. While liquidity is not an imminent concern in our view, the Fed could pre-announce organic balance sheet expansion, or gradual QE, starting in 2026. Alternatively, the Fed could lower the interest rate of reserve balances (IORB) by additional 5bp to limit the Fed Funds rate from rising further, though we see the former more likely than the latter.

Source: Danske Bank

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Adam

Economic

Morgan Stanley said on Friday it now expects the U.S. Federal Reserve to deliver a quarter-percentage point rate cut in December, joining peers J.P.Morgan and BofA Global Research, following dovish remarks from central bank policymakers.

All three brokerages previously expected the Fed to hold rates steady in December.

Softer U.S. economic data released late November and dovish comments from key Fed officials, including from New York Fed President and the Federal Open Market Committee Vice Chair John Williams, Fed Governor Christopher Waller and San Francisco President Mary Daly, have bolstered expectations for a cut.

"It seems we jumped the gun," Morgan Stanley strategists said. "We expect dissents, and Chair Powell will likely trade the cut for language changes in the statement that signal further cuts will have a higher bar."

Traders are currently pricing in a 87.2% chance of a quarter-point interest rate cut at the monetary policy meeting on December 9-10, as per the CME FedWatch Tool.

In addition, Morgan Stanley now expects the Fed to reduce rates in January and April by 25 basis points each to a terminal rate of 3.0%-3.25%, revised from a previous forecast of a cut each in January, April and June.

"We expect Chair Powell to signal that the recalibration phase of monetary policy is now complete. Any additional adjustments will be considered on a meeting-by-meeting basis and guided by incoming data," they said.

Meanwhile, J.P.Morgan expects another cut in January, while BofA forecasts a cut each in June and July next year.

Source: reuters

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Justin

Political

Economic

Russia has been relying on Iranian Shahed drones in its attacks on Ukraine with increasing frequency.

The use of drone warfare in the ongoing Russia-Ukraine conflict does not appear to be dwindling. In fact, Moscow recently fielded a brand-new iteration of the Shahed drone series that Russian forces have been using to strike Kyiv over the last three-plus years of conflict. A video this week has circulated on social media, depicting an air-to-air intercept of an R-60 armed Shahed-160 unmanned aerial vehicle (UAV).

The War Zone reported on the footage, which was shared by the Sternenko Community Foundation, a Ukrainian nongovernmental organization. According to the foundation's claims, the Russian-launched Shahed was destroyed by a Sting anti-drone interceptor. As showcased in images of the aftermath of the attack, the missile appears to have been mounted to a launch rail that had been installed on the Shahed's nose. Despite this instance of the Russian-launched UAV being intercepted, the Shahed drones continue to play a pivotal role in Moscow's war strategy against Kyiv.

The HESA Shahed-136 is an Iranian-designed loitering munition that has become popular due to its role in the ongoing Russia-Ukraine war. This type of lethal UAV is often referred to as a "suicide" or "kamikaze" weapon due to its ability to loiter around a target area before striking.

While the Shahed 136 is rather simple in design, Russia has been significantly ramping up the use of this UAV series since the war began. According to the Center for Strategic and International Studies, Moscow has increased its deployment of these Iranian drones from roughly 200 launches per week to more than 1,000 per week by early 2025. The Shahed-131 variant has also been used frequently in the Eastern European conflict. As an older version of its sister drone, the Shahed-131 features many of the same capabilities as the 136. The Shahed-131 is smaller, however, and it is powered by a reverse-engineered version of the Beijing Micro pilot UAV Control System Ltd MDR-209 Wankel engine.

How Did Russia First Acquire the Iranian Drone Series?

Back in 2023, the White House released images depicting members of a Russian delegation visiting Iran's Karshan Airfield to view several different drone types. While the Iranian regime initially denied its UAV assistance to its Russian ally, the ongoing arms deliveries between the two nations have been confirmed. Early on in the war, the US Defense Intelligence Agency noted that Iran was becoming one of Russia's most critical military backers amidst its Ukraine invasion. Over the last few years, open-source intelligence trackers and analysts have been able to verify that the debris of Iranian-made UAVs like the Shahed have been discovered in the aftermath of attacks in Kyiv.

As the Iranian-Russian defense partnership continues to grow, additional Shahed drone deliveries should be expected.

Source: The National Interest

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Adam

Commodity

Indices: Mixed and Little Changed for Most

- U.S. equity index futures rise after a mixed session that saw only small gains for the S&P 500 (+0.1% to 6,857) as investors position for next week’s Fed meeting; Treasury yields climbed again, and market pricing (CME’s FedWatch) shows expectations for a 25bp cut out of the Fed running at roughly 87%

- Japan’s Nikkei 225 (-1.3%) takes a hit as talk of a BoJ rate hike picks up

Stocks: Intel Takes the Volatility Award

- Shares of Nvidia (NASDAQ:NVDA) close 2.1% higher though broader AI sentiment remained mixed, with investors rotating selectively into software names

- Intel (NASDAQ:INTC) (-7.5%) experiences a volatile session, this time dropping as it abandons plans to sell its networking and communications unit

- Meta (NASDAQ:META) shares climb 3.4% by the close following a Bloomberg report it’ll make major cuts on the metaverse front

- Meme stock movers: Kohl’s (-1.7%), Krispy Kreme (-2.8%), Opendoor (+9.2%), AMC (+2.2%), BlackBerry (+1.8%), Nokia (-1.6%), GameStop (-1.1%)

- Mixed session for crypto stocks: Coinbase (NASDAQ:COIN) (-1%), MicroStrategy (NASDAQ:MSTR) (-1.3%), Marathon Digital (NASDAQ:MARA) (-0.2%), Gemini Space Station (+10.2%), Bullish (+4.4%)

- Earnings:

Salesforce (NYSE:CRM): raises Q4 revenue guidance; shares close 3.7% higher

Snowflake (NYSE:SNOW): beats but guides lower on product revenue; shares plummet 11.4%

Five Below (NASDAQ:FIVE): beats on both earnings and revenue; shares climb 3.2%

nCino: beats and raises its guidance for next year, yet shares drop 4.8% by the close

Dollar General (NYSE:DG): beats on both earnings and revenue, and raises full-year guidance; shares jump 14%

Commodities:

Relatively quiet session for gold above $4.2K as traders await Friday’s PCE inflation data and next week’s Fed decision; rate-cut odds near 90% and a softer dollar keep the metal supported even as firmer Treasury yields cap upside, while silver suffered a sell off taking the gold/silver ratio back to a long-term support level

Calm climb for oil prices (WTI) settling in the $59s as stalled Ukraine peace talks, infrastructure attacks, and upcoming U.S. action against Venezuela keep the market undecided; Saudi OSP for January Arab Light to Asia cut to $0.6 over Oman/Dubai average

Commodity traders keep an eye on copper (LME) after its record high

FX/Central Banks/Crypto: All Calm on the FX Front

- Bitcoin hovers near the upper end of its bear channel as the bulls hope it can breach the line and stick; JPMorgan sees potential upside to $170,000 over the next 6–12 months if it trades like gold

- US Dollar Index partially rebounds off the lows but thus far stuck in the 98s with relatively calm movement on the FX front this morning

- European Central Bank’s Cipollone that inflation is basically under control (Bloomberg)

- Bank of England launched a system-wide stress test for the $16 trillion private equity and private credit sector

- Bloomberg report that key members of Takaichi’s government won’t try to prevent a Bank of Japan rate hike this month

Capital.com Client Sentiment: Small Change in Price…Small Change in Sentiment

- Indices: Small and mixed changes in price for key U.S. equity indices sees little notable changes in sentiment though they remain majority long in all four;

- Commodities: Reduce their long bias in gold though still heavy buy (73% from 77% yesterday), while the pullback in silver takes sentiment closer to extreme long territory (76% from 70%); price gains in WTI sees the bias fall out of extreme buy (77% from 85%) while a further climb in natural gas pushes traders further into heavy sell territory (68%)

- FX: Shifts in EUR/USD (slight buy 52% from a slight sell 52%) and GBP/USD (slight buy 54% from a slight sell 52%), and on the verge of doing so in AUD/USD (slight buy 51%)

Data: Mostly Bad

- U.S. weekly initial claims lower at 191K and so too continuing at 1.939m but Challenger’s job cuts for November over 71K and taking this year’s total to 1.17m; factory orders in September up 0.2% m/m below forecast; natural gas inventories fell by 12B

- Canada: Ivey PMI drops to 48.4, pointing to contraction from a previous expansionary 52.4

- UK Construction PMI for November sees a sharp drop to 39.4 from a previous 44.1 as contraction in the sector worsens

- Japanese household spending in October suffers a surprise contraction down 3% (vs +1% forecast)

Today:

- U.S. PCE price index (7pm Dubai time; but for the month of September), UoM’s preliminary consumer sentiment and inflation expectations, weekly rig count data out of Baker Hughes (10pm), consumer credit (12am)

- EZ Q3 GDP (2pm), German factory orders (11am)

Source: investing

Risk Warnings and Disclaimers

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Adam

Cryptocurrency

BTC Corrective Rally Continues Despite Short-Term Resistance

The crypto market capitalisation fell by 1% to $3.14 trillion over the past 24 hours, retreating from local highs but maintaining a relatively optimistic mood. Among the popular coins for the day, Zcash is once again in the lead, adding 10% and exceeding $400, while XRP loses 3.6% to $2.09. However, we still classify this as a rebound from oversold conditions, with doubts about the ability to renew October highs in the next couple of years.

We also saw attempts to push the market up at the end of 2017 and in 2021. The capitalisation of the crypto market reached new highs during these pre-New Year rallies, but this is a dangerous game in which one needs to choose instruments more carefully than usual.

Bear Market Rebound in Crypto Is Likely to Continue_2

Bitcoin‘s recovery slowed down, facing resistance from sellers in the $ 94,000 range. However, we view this as a pause rather than an exhaustion of the corrective rebound, which may well develop into the $98-100K range in the next few days. Nevertheless, we adhere to the 4-year cycle pattern, as the opposite has not yet been proven. In addition, we have seen a significant pullback from the highs of the previous two months, which is consistent with what happened in 2013, 2017 and 2021.

Crypto News

The Bull Score index developed by CryptoQuant fell to zero for the first time since January 2022, signalling a bearish market phase. CryptoQuant acknowledges that next year, Bitcoin is expected to fall to the $55K-$70K range.

Most of Bitcoin’s on-chain indicators are bearish, notes CryptoQuant CEO Ki Young Ju. According to him, without an influx of liquidity, the crypto market will enter a bearish phase of the crypto cycle.

K33 draws attention to several emerging medium-term factors that could form the basis for market growth. By February 2026, US regulators are expected to issue new rules for 401(k) retirement savings, which could potentially open up a $9 trillion market for Bitcoin.

Ethereum developers have successfully activated the Fusaka hard fork on the ETH mainnet. The update is designed to implement fundamental improvements to increase the scalability, efficiency and security of the Ethereum network.

BlackRock has announced the transformation of the financial system, influenced by cryptocurrencies and the growth of US public debt. Stablecoins are increasingly being used for cross-border payments and have become a bridge between the digital and traditional economies.