07:20 AM EDT, 07/25/2024 (MT Newswires) -- Bank of Canada (BoC) cut interest rates again on Wednesday by 25 basis points to 4.50%, as expected, said Commerbank.

At the same time, BoC made clear that further rate cuts are likely to follow, wrote the bank in a note to clients. BoC Governor Tiff Macklem stated that decisions would be made "one at a time", meaning that there is no predetermined path of rate cuts.

However, the governor also stressed that it was reasonable to expect further rate cuts, stated Commerzbank. With the year-on-year inflation rate likely to reach a value close to the target in the next two months due to base effects, there is little to argue against further rate cuts.

Unless inflation unexpectedly picks up "significantly," another rate cut in early September is likely to remain the baseline scenario, pointed out the bank.

The general impression was that the BoC was shifting its focus from inflation to growth concerns, added Commerzbank. Accordingly, the growth forecasts for 2024 and 2025 were lowered again.

As a result, there is much to suggest that the Canadian dollar (CAD or loonie) will remain under pressure in the coming months: after all, the BoC is likely to cut rates further and the real economy will benefit from the rate cuts only with a time lag. As a consequence, the bank maintains its forecast of a weaker CAD through to the end of the year.