09:18 AM EST, 02/13/2025 (MT Newswires) -- The case for fast Bank of Canada easing remains overwhelming, said Rosenberg Research.

There is a situation of clear excess supply and a 0.75% output gap, noted Rosenberg Research. At 3.0%, the policy rate is still above neutral -- estimated at 2.75% -- while the Taylor rule suggests a 1.45% to 1.70% range is more appropriate.

Oil -- a key source of the Canadian dollar (CAD or loonie) movement -- remains soft on the back of economic uncertainty and weak Chinese demand, with few green shoots on the horizon, stated Rosenberg.

There remains an overhang from United States trade tariff uncertainty. While Rosenberg assesses that U.S. President Donald Trump won't actually impose the broad 25% tariffs that was delayed to the end of February, it also sees recurring threats throughout the first half of 2025.

A recent BoC report on the decline in the Canadian dollar shows that most of it was caused by the global rise in the U.S. dollar, although, of course, interest rates and tariffs did have an effect, added Rosenberg. There is a strong implication that with more easing, there is more room for the loonie to fall.

There remain some risks to the trade from the upcoming Canadian election -- likely to be held in May or June. If, as widely expected, the Conservatives win, Rosenberg anticipates a sympathy pop in the loonie. But this changes nothing about the underlying economic fundamentals in the near term.