07:03 AM EDT, 07/25/2024 (MT Newswires) -- The Bank of Canada's (BoC) Wednesday decision to trim rates another 25 bps was of little surprise, said Bank of Montreal (BMO).

However, the relentlessly dovish commentary in the statements, press conference and Monetary Policy Report (MPR) were "eye-opening," noted the bank. Most notable was the assertion about the need to get growth up to keep inflation from dropping below target.

This is a "long, long way" from just one year ago when the BoC last hiked rates, stated BMO.

What also caught the bank's eye was the view that all of the following

are now back to normal: corporate pricing behavior, the dispersion of price increases, and job vacancies. If so many things are back to normal, why are rates still so far from normal, asked BMO.

The BoC's answer: They shouldn't be.

Also landing on the dovish side, Governor Tiff Macklem again suggested

that Canada's central bank is still a "long way" from the limits of the divergence between Canadian and United States short-term rates.

BMO begs to differ, as the evidence suggests that a move to more than a 100 bp gap (versus 87.5 bps now) on the overnight target will be "seriously" tempting fate for the currency. Good thing for the Canadian dollar (CAD or loonie) that U.S. rate cuts are also now coming firmly into view.