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U.S. Fed likely to cut rates twice this year, economist says



Cooling inflation in Canada could prompt the Bank of Canada to act sooner than expected, according to David Doyle, head of economics at Macquarie Group. In an interview on Tuesday, Doyle highlighted that Canada's inflation rate dropped to 2.8 per cent in February, lower than anticipated. This development increases the likelihood of the central bank considering rate cuts ahead of schedule.


Doyle noted that these results reinforce the idea that the Bank of Canada is on track to halt its interest rate hikes. He suggested that the bank may adopt a wait-and-see approach in response to further economic indicators.


Meanwhile, despite signs of cooling in Canada, the U.S. Federal Reserve is anticipated to announce its latest policy decision on Wednesday. Doyle, however, is among the economists who believe that the Fed will not lower rates.


Contrary to expectations of multiple rate cuts in the U.S. this year, Doyle believes the American economy's underlying strength might encourage the Fed to maintain current rates for a longer period. He cautioned against overly ambitious projections, suggesting that the market should anticipate only two rate cuts this year.


The possibility of diverging monetary policies between Canada and the U.S. is becoming increasingly plausible. If Canada cuts rates while the U.S. maintains its stance, it would create an unusual situation where the two central banks are out of sync.


This scenario underscores the complexity of managing monetary policy amid fluctuating economic conditions. As both countries navigate their respective challenges, the decisions made by their central banks will have significant implications for economic stability and growth.


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