USMC - Easing Begins As Unemployment Rises
2024-06-04 11:10:00 ET
Summary
- The Bank of Canada and European Central Bank are expected to follow the Swiss and Swedish central banks in announcing the first 25 basis points cut since the latest great tightening cycle began 27 months ago in March 2022.
- Policy plans are premised on a relatively modest increase in the Canadian unemployment rate to 6.6% by year-end and a drop back to 6% in 2025.
- Historically, when Canadian unemployment has risen 80 bps from the cycle low, a recession is already underway, and the unemployment rate accelerates well into the subsequent recovery phase while central banks slash policy rates.
We’ve long noted that their actions tend to be contagious once central banks start easing rates in response to disinflation and weakening global demand....
Easing Begins As Unemployment Rises