Institution: Bank of Canada's signal of "ending interest rate cuts" may be premature.

Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce Capital Markets, pointed out that given the current weak state of the Canadian economy, the Bank of Canada should avoid explicitly defining the "appropriate interest rate level." He wrote in a weekly client report: "Is the central bank really out of options? Does the patient need to hear this diagnosis at this time?" This week, while the Bank of Canada lowered its policy rate, it suggested that the easing cycle may be coming to an end. Shenfeld's analysis states that although the bank predicts weak economic growth and has set a high threshold for further rate cuts, its own forecasting model supports further rate cuts due to slow digestion of excess capacity. The disconnect between this policy guidance and economic reality may confuse the markets.