Article content continued

“In the event that we are heading into a global recession and things turn ugly and you get rising unemployment rates globally, then Canada is going to have to ease, maybe even more than the U.S.,” Doyle said in a telephone interview.

Macquarie is assigning a more than 50 per cent chance of a cut in September, plus another cut in October.

Scotiabank also revised its rate outlook last Friday, predicting one rate cut this year from the Bank of Canada no later than at its Oct. 30 decision, and as early as Sept. 4. A second cut would come early in 2020. It based the revision on the view the U.S.-China trade war will persist through Donald Trump’s presidency.

Not Immune

“Risks to the Canadian economy are on the rise,” Jean-François Perrault, Scotiabank’s chief economist, said in a note to clients. “Dependent as it is on international trade, Canada cannot be immune to the rising tide of protectionism.”

Perrault is more sanguine about the domestic outlook than Doyle. He believes Canadian economic conditions don’t warrant rate cuts, but the heightened global uncertainty requires a cautious tone.

“We now believe the Bank of Canada will follow those that cut rates to insure against potential damage,” Perrault said.

Economists and markets have been expecting fewer moves, and a slower pace of cutting from Canada, for a number of reasons. The nation’s economy probably grew at a faster pace in the second quarter than the 2.3 per cent forecast by the Bank of Canada in its July monetary policy report. Interest rates also remain stimulative in real terms, unlike the U.S., and the inflation rate is bang-on the central bank’s target.